ACCT 210 FINAL EXAM

Ace your homework & exams now with Quizwiz!

In a job order cost system, factory labor costs incurred are debited to which account?

Factory Labor

breakeven point in units

Fixed Costs / Unit Contribution Margin

What is contribution margin?

The amount available to cover fixed costs and contribute to profits.

Profitability Index

Net Present Value / Investment Required

Predetermined Overhead Rate formula

estimated total manufacturing overhead cost/expected annual operating activity

A high degree of operating leverage:

exposes a company to greater earnings volatility risk.

A company is more likely to use a job costing system if

it manufactures products with unique characteristics.

for fixed costs, when activity declines,

its cost per unit increases

A cost system that identifies costs by batch rather than a set time period

job order cost system

A cost system that is best for producing items with unique, distinguishing features

job order cost system

Time-and-material pricing would most likely be used by a:

lawn care provider service industry

a variance is favorable if actual costs are

less than standard costs

Compared to budgeting, long-range planning generally has the:

longer time period

Using a higher discount rate to calculate the net present value of a project will

make it less likely that the project will be accepted . resulting NPV will be lower

the essentials of effective budgeting includes

management acceptance, research and analysis, sound organizational structure

a sales budget is

management's best estimate of sales revenue for the year

budgetary control involves

modifying future plans, analyzing differences, determining differences between actual and planned results

The basic rule in a sell or process further decision is to process further as long as the incremental revenue is:

more than the incremental processing costs

A post-audit of an investment project should be performed:

on all significant capital expenditure projects

A budget can be used as a basis for evalutaing

performance

standard costs are

predetermined unit costs which companies use as measures of performance

target cost related to price and profit means that

price and desired profit must be determined before costs. The selling price and the desired profit must be decided before costs are determined.

a total materials variance is analyzed in terms of

price and quantity variances

A cost system that identifies costs with a set time period is a

process system

Fixed manufacturing overhead costs are recognized as:

product costs under absorption costs

the direct labor budget and the manufacturing overhead budget are prepared directly from the

production budget

A responsibility center that incurs costs and also generates revenues is a(n)

profit center

the luggage department of a macy's store is a

profit center

A positive net present value means that the:

project's rate of return exceeds the required rate of return.

controllable margin is defined as

contribution margin less controllable fixed costs

to evaluate the performance of a profit center manager, upper management needs detailed information about

controllable costs and revenues

performance reports for cost centers compare actual

controllable costs with flexible budget data

in a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show

controllable margin

Return on investment is calculated by dividing

controllable margin by average operating assets

In the formula for ROI, the factors for controllable margin and operating assets are, respectively:

controllable margin dollars and average operating assets

The most common method used to establish transfer prices is the

cost based transfer pricing approach

the assembly department of a luggage manufacturer is a

cost center

the human resources department of a macy's store is a

cost center

responsibility centers include

cost centers, profit centers, investment centers

a cost center only incurs

costs and does not directly generate revenue

Overapplied overhead is

credited to COGS

the total overhead variance is the difference between

actual overhead costs and overhead costs applied based on standard hours allowed

Manufacturing overhead is underapplied if

actual overhead is greater than applied

the formula for computing the total overhead variance is

actual overhead less overhead applied

An unfavorable materials quantity variance would occur if

actual pounds of materials used were greater than the standard pounds allowed

In a make or buy decision, opportunity costs are:

added to the make total cost.

the primary objective of just-in-time processing is to

eliminate or reduce all manufacturing inventories

at the break even point, contribution margin

equals fixed costs

Activity Based Overhead Rate formula

estimated overhead per activity / expected use of cost drivers per activity

a manager of an investment center can improve ROI by

reducing variable and/or controllable fixed costs

Operating Leverage

refers to the extent to which a company's net income reacts to a given change in sales

Generally Accepted Accounting Principles allow a company to

report inventory and cost of goods sold at standard costs as long as there are no significant differences between actual and standard cost

break-even point

required sales - VC - FC= net income of 0$

normal standards allow for

rest periods, machines breakdowns, and setup time

The following budgets are used in preparing the budgeted income statement

sales budget, selling and Administrative budget, direct labor budget

a production manager in a manufacturing company would most likely receive a

scrap report

Income statements prepared internally for management often show cost of goods sold at the standard cost and variances are

separately disclosed

the total materials variance is equal to the

sum of the materials price variance and the materials quantity variance

In a decision to retain or replace equipment, the book value of the old equipment is a (an):

sunk cost

In a competitive, common-product environment, a seller would most likely use:

target costing

a project should be accepted if its internal rate of return exceeds

the company's required rate of return

budgeted income statement is the

the end-product of the operating budgets.

In order to maximize profits when limited resources are available a company should concentrate on the producing products with:

the highest contribution margin per unit of limited resource.

When a company has a limited resource, it should apply additional capacity of that resource to providing more units of the product or service that has:

the highest unit contribution margin of that limited resource.

raw materials are assigned to a job when

the materials are issued by the materials storeroom.

To assign overhead costs to an individual product, the activity-based overhead rate is multiplied by

the number of cost drivers used by product

If $30,000 direct materials are requisitioned for Job No. 2453 and $5,000 of indirect materials are requisitioned for general use, the debit to Work in Process Inventory should be

$30,000 Direct materials

Labor Price Variance

(AH x AR) - (AH x SR)

The formula for the materials quantity variance (MQV) is

(AQ × SP) - (SQ × SP)

The formula for the materials price variance (MPV) is

(AQxAP) - (AQxSP)

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Standard cost accounting system

A double-entry system of accounting in which standard costs are used in making entries, and variances are recognized in the accounts.

Any event, action, transaction, or work sequence that incurs cost when producing a product or providing a service

Activity

A costing system that allocates overhead

Activity Based Costing

The overhead attributed to a distinct type of activity or related activities

Activity Cost Pool

Total Overhead Variance

Actual Overhead - Applied Overhead

the format of a cash budget is

Beginning cash balance + Cash receipts - Cash disbursements +/- Financing = Ending cash balance.

What budgeted amounts appear on the flexible budget report?

Budgeted amounts for the actual activity level achieved.

Any factor or activity that has a direct cause-effect relationship with the resources consumed.

Cost Driver

Usually, under- or overapplied overhead is considered to be an adjustment to

Cost of Goods sold

In a job order cost system, indirect materials used are debited to which account?

Manufacturing Overhead

over applied overhead

Manufacturing overhead has a credit balance, Overhead assigned to work in process is greater than overhead incurred

underapplied overhead

Manufacturing overhead has a debit balance, Overhead assigned to work in process is less than overhead incurred

Margin of Saftey Ratio =

Margin of Saftey / Planned Sales

What is the order of involvement of the following parties in capital budgeting authorization process?

Plant Managers, Capital Budget Committee, Officers, Board of Directors

Determine Predetermined Overhead Rate: Estimated annual manufacturing overhead costs: $400,000. Estimated annual machine hours: 100,000 machine hours.

Predetermined overhead rate $4 per machine hour. $400,000/$100,000

In a job order cost system, raw materials purchased are debited to which account?

Raw Materials Inventory

Contribution Margin

Sales - Variable Costs

Which one of the following is the format of a CVP income statement?

Sales − Variable costs − Fixed costs = Net income.

cost plus pricing means that

Selling price = Cost + (Markup percentage × Cost).

Contribution Margin Ratio

Unit Contribution Margin / Unit Selling Price

Managment 's decision making process

The order of the steps in the decision process is (1) determine and evaluate possible courses of action, (2) make the decision, and (3) review the results of decision.

incremental analysis

The process of identifying the financial data that changes under alternative courses of action.

what is the difference between a budget and a standard?

a budget is a total amount while a standard expresses only a unit amount

The accounting department of a manufacturing company is an example of

a cost center

an example of an intangible benefit provided by a capital budgeting project is:

a decrease in customer complaints regarding poor quality

controllable costs for responsibility accounting purposes are those costs that are directly influenced by

a given manager within a given period of time

The setting of standards is

a management decision

The budget for a merchandiser differs from a budget for a manufacturer because:

a merchandise purchases budget replaces the production budget, the manufacturing budgets are not applicable

a static budget is

a projection of budget data at a single level of activity

When units produced are greater than units sold, net income will be higher under

absorption costing since more fixed costs will remain in inventory

If the Net Present value is equal to zero, do we accept or reject?

accept proposal

Under a traditional costing system, a single predetermined overhead is used which can

be based on direct labor

In most cases, not-for-profit entities:

begin the budgeting process by budgeting expenditures rather than receipts.

In using variance reports, management looks for

both favorable and unfavorable variances that exceed a predetermined quantitative measure such as a percentage or dollar amount

In making business decisions, management ordinarily considers:

both financial and nonfinancial information

the point where total sales equal total variable plus total fixed costs.

break even point

Standards differ from budgets in that:

budgets are a total amount and standards are a unit amount

depending on nature of the report, budget reports are prepared

daily, weekly, monthly

Underapplied overhead is

debited to COGS

Capital Budgeting Decision examples

decision to build a new plant, decision to renovate existing facility, decision to buy piece of machinery

the formula for the production budget is budgeted sales in units plus

desired ending finished goods units less beginning finished goods units

the budgeted balance sheet is

developed from the budgeted balance sheet for the preceding year and the budgets for the current year.

total overhead variance is the

difference between actual overhead costs and overhead costs applied based on standard hours allowed

fixed costs that relate specifically to one center and are incurred for the sole benefit of that center are

direct fixed costs

The direct labor quantity standard is sometimes called the

direct labor efficiency standard

Under responsibility accounting, the evaluation of a manager's performance is based on matters that the manager:

directly controls

if a project has intangible benefits whose value is hard to estimate, the best thing to do is

either include a conservative estimate of their value or ignore their value in initial net present value calculation but then estimate whether their potential value is worth at least the amount of net present value deficiency

A static budget is useful in controlling costs when cost behavior is

fixed

formula for overhead volume variance

fixed overhead rate x (normal capacity hours - standard hours allowed)

normal standards allow

for rest periods, machine breakdowns and setup time

net income will be

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

A company with high operating leverage:

has a greater proportion of fixed costs to variable costs.

The margin of safety ratio is:

higher for a company with lower operating leverage.

Net income computed under absorption costing will be:

higher than net income computed under variable costing when units produced are greater than units sold.

Alternative name for discount rate

hurdle rate, required rate of return and cutoff rate

standards based on the optimum level of performance under perfect operating conditions are

ideal standards

responsibility reports for cost centers

include only controllable costs

The decision rule in a sell-or-process-further decision is: process further as long as the incremental revenue from processing exceeds:

incremental processing costs.

variable costing is useful

internal reporting services

A nike store at an outlet mall is an

investment center

activity based costing

is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.

What are two weakness of cash payback approach?

it ignores the time value of money and ignores useful life of alternative projects

net income under absorption costing is higher than net income under variable costing when

the number of units produced exceeds number of units sold

break-even point

the point at which the costs of producing a product equal the revenue made from selling the product

a budget is

the primary method of communicating agreed upon objectives throughout an organization

a distinguishing characteristic of an investment center is that

the profitability of the center is related to the funds invested in the center

relevant range is

the range over which the company expects to operate during a year.

When a company uses time-and-material pricing, the material loading charge is expressed as a percentage of:

the total estimated costs of parts and materials for the year. In time-and-material pricing, the material loading charge is expressed as a percentage of the total estimated costs of parts and materials for the year.

variances are the differences between

total actual costs and total standard costs

Margin of Safety in Dollars

total budgeted (or actual) sales - break even sales

The formula for computing the direct labor budget is to multiply the direct labor cost per

total required direct labor hours

If actual costs are greater than standard costs, there is a(n)

unfavorable variance

What type of cost remains the same per unit at every level of activity?

variable cost

the total overhead variance is the difference between

what was actually incurred and overhead applied


Related study sets

Assessment and Management of Patients with Diabetes

View Set

LI274 Answers to All Quizzes From First Half

View Set