Accounting 200 Final Terms

fixed costs examples

-property taxes -rent -equipment -advertising

within the relevant range, a difference between variable costs and fixed costs

-variable costs per unit are constant - fixed costs per unit fluctuate

Which of the following statements is true? 1. A benefit from budgeting is that it forces managers to think about and plan for the future. 2. One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks. 3. One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers.

1

Which of the following statements is true? 1. The budgeted income statement is typically prepared before the budgeted balance sheet. 2. The cash budget is the starting point in preparing the master budget. 3. The production budget is typically prepared prior to the sales budget.

1

Which of the following statements is true? 1. Budgets are used for the distinct purposes of planning and profit. 2. Control involves developing goals and preparing various budgets to achieve those goals. 3. A continuous or perpetual budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.

3

master budget

A number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.

Which of the following statements is true? 1. The master budget consists of a number of separate but interdependent budgets. 2. The production budget is typically prepared before the direct materials budget. 3. The selling and administrative budget is typically prepared before the cash budget.

All

selling costs

All costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer. can be direct or indirect

Administrative costs

All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling can be direct or indirect

Which of the following statements is true? I. In the manufacturing overhead budget, the non-cash charges (such as depreciation) are deducted from the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead. II. The manufacturing overhead budget lists all costs of production other than direct materials and direct labor.

Both

Which of the following statements is true? I. The direct labor budget begins with the required production in units from the production budget. II. The direct labor budget shows the direct labor-hours required to satisfy the production budget.

Both

Which is NOT a period cost? 1. Depreciation of factory maintenance equipment. 2. Salary of a clerk who handles customer billing. 3. Insurance on a company showroom where customers can view new products. 4. Cost of a seminar concerning tax law updates that was attended by the company's controller.

Depreciation of factory maintenance equipment

The relative proportion of variable, fixed, and mixed costs in a company is known as the company's

cost structure

There are various budgets within the master budget. One of these budgets is the production budget. How would you describe the production budget?

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

operating budgets...

cover a one-year period and many companies divide their annual budget into 4 quarters

direct materials

Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. examples: doors on whirlpool washing machines

Which of the following budgets are prepared before the sales budget? Budgeted income statement and Direct Labor Budget?

Neither

a manufacturer's product flows through 3 inventory accounts such as

Raw Materials, Work in Process and Finished Goods

what is the first step in the budgeting process?

preparing a sales budget

contribution format

Sales Variable Expenses Contribution Margin Fixed Expenses Net Operating Income

Indirect materials

Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it

Which of the following statements is true? I. The selling and administrative expense budget lists all costs of production other than direct materials and direct labor. 2. The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit. 3. The disbursements section of a cash budget consists of all cash payments for the period except cash payments for dividends.

The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit.

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

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

Indirect labor

The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.

which of the following statements is a common assumption underlying cost volume profit analysis? a. the variable cost per unit remains constant b. selling price per unit remains constant c. total fixed costs are constant within the relevant range d. the total variable costs remain constant as the level of sales fluctuates

a, b and c

continuous budget

a 12-month budget that rolls forward one month as the current month is completed

which of the following cost behavior assumptions is true? a. variable costs are constant if expressed on a per-unit basis b. total variable costs increase as the level of activity increases c. the average fixed cost per unit increases as the level of activity increases d. total fixed costs decrease as the level of activity decreases

a and b

which of the following statements is false? a. Under some circumstances, a sunk cost may be a relevant cost. b. Future costs that do not differ between alternatives are irrelevant. c. The same cost may be relevant or irrelevant depending on the decision context. d. Only variable costs are relevant costs. Fixed costs cannot be relevant costs.

a and d sunk costs are ALWAYS irrelevant fixed costs CAN be relevant

an example of a committed fixed cost is... 1. management training seminars 2. a long-term equipment lease 3. research and development 4. advertising

a long term equipment lease

if the contribution margin is not sufficient to cover fixed expenses

a loss occurs

which of the following statements is true? a. indirect materials and indirect labor are included in manufacturing overhead b. examples of selling costs include sales commissions advertising, shipping, and the costs of operating finished goods warehouses c. for financial accounting purposes, product costs include direct materials, direct labor, and manufacturing overhead d. for financial accounting purposes, period costs are also referred to as inventoriable costs

a, b, c

which of the following costs would be variable with respect to number of cones sold at Baskin Robbins?

a. cost of lighting in store b. wages of store manager c. cost of ice cream d. cost of napkins for customers

An unfavorable materials quantity variance indicates that

actual usage of material exceeds the standard material allowed for output.

Which of the following is an example of a period cost in a company that makes clothing? 1. Fabric used to produce men's pants. 2. Advertising cost for a new line of clothing. 3. Factory supervisor's salary. 4. Monthly depreciation on production equipment.

advertising cost for a new line of clothing

period costs

all costs that are not product costs ALL SELLING AND ADMINISTRATIVE EXPENSES ARE TREATED AS PERIOD COSTS examples: sales commissions, advertising, rental costs of administrative offices

manufacturing costs

all manufacturing costs except for direct materials and direct labor and they are INDIRECT

the salary paid to the president of a company would be classified on the income statement as

an administrative expense

common cost

an indirect cost, it's irrelevant

Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called

avoidable costs

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 of the following statements is true? a. Product costs are expenses on the income statement in the period incurred b. Direct labor is a manufacturing cost and a product cost c. conversion costs include direct materials and direct labor d. non manufacturing costs are treated as period costs

b and d

bottom up budgeting

budget goals are set by carious operating departments. they push the revenue and expense goals up the corporation.

top-down budgeting

budget goals are set by the corporation and the operation is expected to make the budget work. Usually the corporation will set revenue and net income goals

participative budget

budget that is prepared with the full cooperation and participation of managers at all levels

11. Which of the following statements is true? a. Common fixed costs should be allocated to business segments when making decision because all a company's costs need to be covered to be profitable. b. When making business decisions, common fixed costs should be allocated to business segments based on each segment's sales revenue because this reflects each segment's "ability to bear" additional costs. c. Common fixed costs should not be allocated to business segments for decision-making purposes. d. When making decisions, allocating common fixed costs to segments may understate the true profitability of those segments.

c and d

direct cost

can be easily traced to a cost object

indirect cost

cannot be easily traced to a cost object

which of the following statements is true? a. the manufacturing overhead budget includes depreciation related to assets that support a company's selling and administrative functions b. cash disbursements for selling and administrative expenses are reported in the budgeted income statement c. the selling and administrative expense budget includes depreciation related to manufacturing assets d. the total variable and fixed selling and admin expenses incurred during a period are reported in the budgeted income statement

d

fixed costs on a per unit basis

decrease with increase in activity

Fixed costs per unit

decreases as activity level rises

All of the following are examples of product costs except: 1. depreciation on company's retail outlets 2. salary of plant manager 3. insurance on factory equipment 4. rental costs of factory equipment

depreciation on company's retail outlets

the salary of head of pediatrics on the pediatric department

direct

direct or indirect: wages of pediatric nurses at a pediatric department

direct cost

lab tests by outside contractor on a particular department

direct cost

lab tests by outside contractor on a particular patient

direct cost

prescription drugs on a particular patient

direct cost

conversion cost

direct labor and manufacturing overhead

manufacturing two DIRECT cost categories:

direct materials and direct labor

prime cost

direct materials and direct labor

product costs include

direct materials, direct labor, manufacturing overhead examples:

direct labor

factory labor costs that can be easily traced to individual units of product

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

flexible budget

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will

have no effect on the break-even volume.

prime costs

include direct materials and direct labor

once a company hits its break-even point, net operating income will

increase by an amount equal to the contribution margin per unit multiplied by the number of units sold above the break even point

Variable Cost in total

increases and decreases in proportion to changes in the activity level

the salary of the head of pediatrics on a particular pediatric patient

indirect

heating the hospital on the pediatric department

indirect cost

hospital chaplain's salary on a particular patient

indirect cost

product costs are also known as

inventoriable costs

committed fixed costs

long-term, cannot be significantly reduced in short term examples: depreciation on buildings equipment and real estate taxes

manufacturing INDIRECT cost category:

manufacturing overhead

discretionary fixed costs

may be altered in the short term by current managerial decisions examples: advertising and research and development

which of the following would not affect the breakeven point?

number of units sold

period or product: depreciation on a salespersons car

period

opportunity cost

potential benefit is given up when one alternative is selected over another

which of the following would be considered a period rather than a product cost in a manufacturing company? A. Manufacturing equipment depreciation B. Property Taxes on corporate headquarters C. Direct materials costs D. electrical costs to light the production facility E. Sales Commissions

property taxes and sales commissions

the manufacturing overhead budget

provides a schedule of all costs of production other than direct materials and labor costs, shows expected cash disbursements for manufacturing overhead, and is prepared after sales budget

When preparing a direct materials budget, the required purchases of raw materials in units equals:

raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

Fixed costs in total

remains constant

Variable Cost per unit

remains constant

Which of the selling and administrative expenses of the company is variable? rent sales commissions maintenance expense clerical expense

sales commissions

variable costs examples

sales commissions, credit card fees, hourly wages, and material costs

contribution margin is

sales less variable production, variable selling and variable administrative expenses

nonmanufacturing costs are also called

selling and administrative costs (SG and A)

nonmanufacturing costs are divided into two categories:

selling costs and administrative costs

the cash budget

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

A cost incurred in the past that is not relevant to any current decision is classified as a

sunk cost

An example of a committed fixed cost would be: 1. taxes on real estate 2. management development programs 3. public relations costs 4. advertising programs

taxes on real estate

in a flexible budget, what will happen to fixed costs as activity level increases?

the fixed cost per unit will decrease

The usual starting point for a master budget is

the sales forecast or sales budget

the breakeven point occurs on the CVP graph where

total contribution margin equals total fixed expenses

Direct Labor is a manufacturing cost and a product cost

true

Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

true

Non manufacturing costs are treated as period costs

true

Which costs will change with a decrease in activity within the relevant range?

unit fixed costs and total variable cost

A merchandising company typically will have a high proportion of which type of cost in its cost structure?

variable

3 cost classifications

variable, fixed and mixed

variable costs can be expected to

vary in total direct proportion to changes in activity level