ACC 213 FINAL

If the contribution margin is not sufficient to cover fixed expenses:

A loss occurs

The term differential cost refers to

An incremental cost from selecting one alternative instead of another

Which of the following may appear on a flexible budget performance report

An unfavorable activity variance, a favorable revenue variance, and unfavorable spending variance

The term relevant range means the range of activity over which

Assumptions about fixed and variable cost behavior are reasonably valid

Prime costs consist of which of the following

Both direct materials and direct labor cost

Mossfeet shoe corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year

Contribution margin ratio increase break even point decrease

Which terms will make the following statements are true action overhead is under applied and manufacturing overhead account as a_______ balance and applied manufacturing overhead is less than______ manufacturing overhead

Debit actual

Manufacturing overhead applied to production is recorded with a

Debit to (increase) The work in process account

When using a flexible budget a decrease in activity within the relevant range

Decreases total cost

Which of the following would be the least appropriate overhead allocation base for a highly automated manufacture of automobile tires

Direct labor hours

Which of the following cost at a manufacturing company would be treated as a product cost under variable costing

Direct material cost

It is profitable to continue processing joint products after the split off point if the total revenue exceeds joint cost

FAlse

Opportunity cost represent costs can be reduced by effective management of operations

Fakse

A decrease in the number of units sold will decrease the break even point

False

A fixed production costs incurred before the split off point in a joint process is relevant in a sell or process further decision

False

A revenue variance is unfavorable in the revenue in the static planning budget is less than the revenue in the flexible budget

False

A spending variance is the difference between the amount of the cost in the static planning budget and the amount of the cost in the flexible budget

False

Actual costs are determined by plugging the actual level of activity for the period into the cost formula used in flexible budget

False

All fixed costs are sunk cost

False

Although a contribution margin income statement is useful for external reporting purposes it has serious limitations when used for managerial decisions

False

An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period

False

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity a lot for the actual output of the period

False

Any decision to drop a product the product should be charged for rent in proportion to The space it occupies even if the space has no alternative you stand the rental payment is unavoidable

False

Any special order situation that involves using capacity that is not idle opportunity costs are zero

False

Comparing a static planning budget to actual cost is a good way to assess whether variable costs are under control

False

Flexible budget performance report contains activity variances but not revenue or spending variances

False

Future costs that do not differ between alternatives are relevant in a decision

False

If variable manufacturing overhead is applied based on direct labor hours it is impossible to have a favorable labor rate variance in an unfavorable variable overhead rate variance for the same period

False

In general the production manager is responsible for the materials price variance

False

Opportunity costs are rarely relevant when making managerial decisions

False

Period costs are expensed to the work in process account before being included in the income statement

False

Relevant costs in a make or buy decision of a part include stuff up overhead cost for the manufacture of the product using the outsourced part

False

Skilled workers with high hourly rates of pay are given duties that require a little skill and call for a lower hourly rate of pay result in a favorable labor rate variance

False

Sunk costs usually are relevant when making decisions

False

The book value of an old machine is always considered an opportunity cost in decision

False

The contribution margin generated by an alternative use of a production equipment should not be considered when evaluating a make or buy decision

False

The process of assigning overhead to cost object is known as cost segregation

False

The salary paid to a store manager is not a traceable fixed expense of the store

False

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio

False

Variable costs are always relevant costs in decision

False

When combining activities in an activity-based costing system Batch level activities should be combined with unit level activities whenever possible

False

When the level of activity increases within the relevant range variable cost per unit will increase

False

When using segmented income statement or dollar sales for a company to break even traceable fixed expenses divided by the overall contribution margin ratio

False

While preparing a direct materials budget beginning inventory for Raw materials should be added to production needs and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased

False

The cost of leasing premises to operate a salad dressing factory can be Best described as a

Fixed cost

To obtain the dollar sales volume necessary to attain a given target profit which of the following formulas should be used

Fixed expenses target profit divided by contribution margin ratio

Which of the following statements is true when referring to the high low method of cost analysis

In essence Hight low method draws a straight line through two data points

Which of the following is an assumption underlying standard CVP analysis

In multi product companies the sales mix is constant

Which of the following statements is correct regarding the total cost equation Y=A+BX

In the high low method B equals the change in total cost divided by the change in activity

There are various budgets within the master budget one of these budgets is the production budget which of the following best describes the production budget

It is calculated based on the sales budget and the desired ending inventory.

Poorly trained workers could have an unfavorable effect on which of the following variances

Labor rate variance no materials quantity variance yes

Which of the following statements is correct concerning the manufacturing overhead budget

Manufacturing overhead budget by the schedule for all costs of production other than direct materials and labor cost The manufacturing overhead budget shows expected cash disbursements for manufacturing overhead The manufacturing overhead budget is prepared after the sales budget

If sales volume increases and all other factors remain constant then the

Margin of safety will increase

If the degree of operating leverage is four and a 1% change and quantity sold should result in a 4% change in

Net operating income

Departmental overhead rates may not correctly assign overhead costs due to

Overreliance on volume as a basis for allocating overhead cost where products differ regarding the number of units produced lot size or complexity of production

When preparing a direct materials budget the required purchases of raw materials in unit equals

Raw materials needed to meet the production schedule plus desired ending inventory of raw materials minus beginning inventory of raw materials

The production department should generally be responsible for materials price variance is that resulted from

Rush orders arising from poor scheduling

Which of the following statements is correct concerning the cash budget

The cash budget should be prepared before the budgeted income statement The cash budget should be prepared before the budgeted balance sheet The cash budget builds on earlier budgets and schedules as well as additional data

Which of the following is true regarding the contribution margin ratio of a company that produces only one single product

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit

Hayworth corporation has just segmented last year's income statement into its 10 product lines. The chief executive officer is curious as to what affect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole

The product line segment margin

The usual starting point for a master budget is

The sales forecast or sales budget

If variable manufacturing overhead is applied on the basis of direct labor hours and the variable overhead rate variance is favorable then

The standard variable overhead rate exceeded the actual rate

In a flexible budget what will happen to fix cost as low activity level increases

The total fixed cost will not change

When using data from a segmented income statement the dollar sales for a segment to break even is equal to

Traceable fixed expenses divided by segment CM ratio

A companies manufacturing overhead account should include a salary of a production supervisor

True

A continuous or perpetual budget is a 12 month budget the rolls forward one month or quarter as the current month or quarter is completed

True

A cost that can be avoided by choosing one alternative over another is relevant for decision purposes

True

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service

True

A shift in the sales and mix from products with my contribution margin ratio's toward products with the contribution margin ratio's will raise the break even point for the company as a whole

True

An unfavorable activity variance for revenue indicates the actual activity was less than expected when the static planning budget was developed

True

Differences between the static planning budget and a flexible budget so what should have happened because the actual level of activity deferred from what had been planned

True

Direct material costs frequently are variable cost

True

For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales.

True

If manufacturing overhead is over applied then closing manufacturing overhead cost to cost of goods sold reduced cost of good sold

True

If the actual hourly rate is greater than the standard hourly rate the labor rate variance is labeled unfavorable

True

If the variable expense per unit decreases and all other factors remain the same the contribution margin ratio will increase

True

In the manufacturing overhead budget for non-cash charges such as depreciation are deducted from the total budgeted manufacturing overhead expense to determine the expected cash disbursements for manufacturing overhead

True

Managerial decision making should focus on the analysis of differential costs and benefits

True

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.

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

Product whose revenue do not cover its variable cost and it's traceable fixed cost should usually be dropped

True

The direct labor budget begins with the required production in units from the production budget

True

The labor efficiency variance is labeled favorable if actual hours used or less than the standard hours allowed for the actual output

True

The number of units to be produced in a period can be determined by adding the expected sales to thedesired ending inventory and then deducting the beginning inventory

True

The use of a predetermined overhead rates in a job order cost system makes it possible to estimate the total cost of a given job as soon as production is completed

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 cost actual cost should be compared to what the cost should have been for the actual level of activity

True

When a company has a production constraint total contribution margin will be maximized by emphasizing the products with the highest contribution margin per unit of the constrained resource

True

When more hours of labor time are necessary to complete a job then the standard allows the labor efficiency variance is unfavorable

True

When production exceeding sales for the period absorption costing that operating income will exceed variable costing net operating income

True

When the activity measure is the number of units sold the revenue variance is favorable and the average actual selling price is greater than expected

True

When the predetermined overhead rate is based on the level of activity at capacity an item called the cost of unused capacity may appear as an expense on income statement prepared for internal management use

True

Providing the power required to run production equipment is an example of

Unit level activity

An unfavorable materials quantity variance indicates that

actual usage of material exceeds the standard material allowed for output

Which of the following would be classified as a product level activity

advertising a product

Generally speaking net operating income under variable and absorption costing will

be equal only when production and sales are equal

Variable manufacturing overhead is applied to products on the basis of a standard direct labor hours if the labor efficiency variance is favorable the variable overhead efficiency variance will be

favorable

A budget that is based on the actual activity of a period is known as

flexible budget

The opportunity cost of making a component part in a factory with no excess capacity is the

net benefit foregone from the best alternative use of the capacity required

Favorable labor rate variance indicates that

the standard rate exceeds the actual rate