Accounting review (chapter 21-22)

The budget that summarizes future plans for the acquisition of fixed assets is

capital expenditures budget

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed

continuous budgeting

At the end of the fiscal year, variances from standard costs are usually transferred to the

cost of goods sold account

A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called master budgeting.

False

A company must choose either a standard system or nonfinancial performance measures to evaluate the performance of a company.

False

An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.

False

Standards are set for only direct labor and direct materials.

False

The cash budget summarizes future plans for acquisition of fixed assets.

False

The first budget to be prepared is usually the cash budget.

False

When budget goals are set too tight, the budget becomes less effective as a tool for planning and controlling operations.

True

Since the controllable variance measures the efficiency of using variable overhead resources, if budgeted variable overhead exceeds actual results, the variance is favorable.

true

The difference between the standard cost of a product and its actual cost is called a variance.

true

The unfavorable volume variance may be due to all of the following factors except

unexpected increases in the cost of utilities

Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs?

used to indicate where changes in technology and machinery need to be made

A process whereby the effect of fluctuations in the level of activity is built into the budgeting system is referred to as flexible budgeting.

true

Accounting systems that use standards for product costs are called standard cost systems.

true

One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs.

true

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes

True

Financial reporting systems that are guided by the principle of exceptions concept focus attention on variances from standard costs.

True

Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials spoilage.

True

Nonfinancial measures are often linked to the inputs or outputs of an activity or process.

True

Nonfinancial performance output measures are used to improve the input measures.

True

Standard cost variances are usually not reported in reports to stockholders

True

The budgeted balance sheet assumes that all operating and financing plans are met.

True

The budgeting process is used to effectively communicate planned expectations regarding profits and expenses to the entire organization.

True

The capital expenditures budget is part of the planned investing activities of a company.

True

The master budget is an integrated set of budgets that tie together a company's operating, financing and investing activities into an integrated plan for the coming year.

True

The principle of exceptions allows managers to focus on correcting variances between standard costs and actual costs.

True

The production budget is the starting point for preparation of the direct labor cost budget.

True

Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem?

allowing employees the opportunity to be a part of the budget process

Planning for capital expenditures is necessary for all of the following reasons except

amounts spent for office equipment may be immaterial

A formal written statement of management's plans for the future, expressed in financial terms, is a

budget

The benefits of comparing actual performance of the operations against planned goals include all of the following except

determining how managers are performing against prior years' actual operating results

The standard price and quantity of direct materials are separated because

direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department

The budget process involves doing all of the following except

dismissing all managers who fail to achieve operational goals specified in the budget

The responsibility for coordinating the preparation of a master budget should be assigned to the CEO of a firm.

false

standard costs should always be revised when they differ from actual costs.

false

Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the

fixed factory overhead volume variance

A series of budgets for varying rates of activity is termed a(n)

flexible budget

Which of the following budgets allow for adjustments in activity levels?

flexible budget

If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is a

quantity variance

Which of the following would not lend itself to applying direct labor variances?

research and development scientist

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a

responsibility center

The principle of exceptions allows managers to focus on correcting variances between

standard costs and actual costs

A favorable cost variance occurs when

standard costs are more than actual costs