Accounting Final

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some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of

return on investment

true or false: 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

true or false: an unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed

true

labor rate variance=

(actual hours*standard rate)-(actual hours*actual rate)

price variance=

(actual quantity*standard price)-(actual quantity*actual price)

labor efficiency variance=

(standard hours-actual hours)*standard price

quantity variance=

(standard quantity-actual quantity)*standard price

a segment of a business responsible for both revenues and expenses would be called

a profit center

to calculate revenue variance:

actual-flexible

which of the following would be considered an operating asset in return on investment computations

accounts receivable

which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same

an increase in operating assets

all other things equal, which of the following would increase a division's residual income

decrease in average operating assets

when tying compensation to the balanced scorecard, management must ensure that the performance measures have all the following characteristics except

easily manipulated

true or false: a favorable spending variance occurs when the actual cost is less than the amount of the cost in the static planning budget

false

true or false: a flexible budget performance report with more than one cost driver can contain activity variances but not revenue or spending variances due to the increased complexity

false

true or false: a flexible budget performance report with more than one cost driver will always have more unfavorable revenue and spending variances than a performance report with only one cost driver

false

true or false: a revenue variance is favorable if the actual revenue is greater than the revenue in the static planning budget

false

true or false: an unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period

false

true or false: if activity is higher than expected, total fixed costs should be higher than expected. if activity is lower than expected, total fixed costs should be lower than expected

false

true or false: if skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in a favorable labor rate variance

false

true or false: in general, the production manager is responsible for the materials price variance

false

true or false: inspection time is generally considered to be value-added time

false

true or false: one disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers

false

true or false: one of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks

false

true or false: the standard labor rate per hour should not include any employment taxes

false

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

flexible budget

to calculate spending variance:

flexible-actual

when it does not say cash disbursements, should depreciation be included or not

included

which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment (ROI) computations

it eliminates the age of equipment as a factor in return on investment (ROI) computations

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

ROI secondary calculation=

margin*turnover

residual income=

net operating income-(average operating assets*required rate of return)

ROI=

net operating income/average operating assets

margin=

net operating income/sales

which of the following segment performance measures will decrease if there is an increase in the interest expense for that segment

no return on investment, no residual income

when it says cash disbursements, should depreciation be included or not

not included

to calculate activity variance:

planning-flexible

manufacturing cycle efficiency=

process or value-added time/throughput time

throughput time=

process time+inspection time+move time+queue time

when preparing a direct materials budget, the required purchases of raw materials in units equal:

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

the production department should generally be responsible for materials price variances that resulted from

rush order arising from poor scheduling

turnover=

sales/average operating assets

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

the fixed cost per unit will decrease

which of the following statements is not correct concerning the manufacturing overhead budget

the manufacturing overhead budget shows only the variable portion of manufacturing overhead

the usual starting point for a master budget is

the sales forecast or sales budget

a favorable labor rate variance indicates that

the standard rate exceeds the actual rate

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

true or false: a balanced scorecard contains both customer and internal business process performance measures because improvements in internal business process should result in improvements in customer satisfaction

true

true or false: a benefit from budgeting is that it forces managers to think about and plan for the future

true

true or false: a manager would generally like to see a trend indicating a decrease in setup time

true

true or false: cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period

true

true or false: comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control

true

true or false: differences between the static planning budget and the flexible budget shows what should have happened because the actual level of activity differed from what had been planned

true

true or false: financial measures such as ROI and residual income as well as operating measures may be included in a balanced scorecard

true

true or false: fixed costs should usually be included in performance reports because fixed costs are generally controllable

true

true or false: flexible budgets can be used when there is more than one cost driver (i.e., measure of activity)

true

true or false: if the MCE is equal to 0.6, then 60% of the time a unit is in process is spent on activities that add value to the product

true

true or false: in a flexible budget, when the activity declines, the total variable cost also declines

true

true or false: move time is considered non-value-added time

true

true or false: performance reports with more than one cost driver typically have more accurate variances than those based on one cost driver

true

true or false: queue time is considered non-value-added time

true

true or false: the activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget

true

true or false: the direct labor budget begins with the required production in units from the production budget

true

true or false: the direct labor budget shows the direct labor-hours required to satisfy the production budget

true

true or false: the main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity

true

true or false: the materials price variance is computed based on the amount of materials purchased during the period

true

true or false: the number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory

true

true or false: the performance measures on a balanced scorecard tend to fall into four groups: financial measures, customer measures, internal business process measures, and learning and growth measures

true

true or false: the standard price per unit for direct materials should reflect the final, delivered cost of the materials

true

true or false: the standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period

true

true or false: to help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity

true

true or false: when more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable

true

true or false: when the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected

true

delivery cycle time=

wait time+throughput time


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