ACCT 230 EXAM 2
Blissful Breeze manufactures and sells ceiling fans. Each fan has a unit product cost of $112 and a unit selling price of $190. If Blissful Breeze produces 900 fans and sells 842 fans this month, the total cost of goods sold will be $_____
$94,304 **
The Matisse Co. is preparing a cash budget for the month of January. The following information has been gathered: January 1st - Beginning Cash Balance - $40,000 Long-term Assets Purchased & Paid for in January. - $40,000 Inventory Purchases in January - $20,000 (60% paid in January and 40% paid in February) Cash Collections during January - $100,000 1st Quarter Taxes - $2,000 (due and scheduled to be paid March 1st) Selling & Administrative Expenses - $6,000 in January (includes $1,000 depreciation expense) Insurance Expense - $4,000 (entire amount paid in January) The Matisse Co. would like to have at least $50,000 cash on hand at the end of January. The company has a $70,000 line of credit at the local bank. How much will the company have to borrow to meet its minimum ending cash balance?
$0 **
The Animal Motor Company has three divisions: the Fox Division, Tiger Division and Panther Division. The company's minimum requirement is 10%. Each manager is currently being evaluated to determine who performed best. Here is additional information specific to each division of the Animal Motor Company: Income from Operations (Net Income from Operations) = $300,000 Average Operating Assets (Invested Assets) = $5,000,000 The ROI for the Fox Division would be closest to ______.
($300,000 / $5,000,000) * 100 = 6%
The standard hours per unit includes both direct and indirect labor hours.
**
When using variable costing, fixed manufacturing overhead is _______.
**
A company can increase its return on investment (ROI) by ______. - increasing operating assets - reducing operating expenses - borrowing additional funds - increasing sales
- Reducing operating expenses - increasing sales
Which of the following budgets are directly based on information from the sales budget? - Selling & administrative expense - Direct materials - Manufacturing overhead - Production
- Selling & administrative expense - Production
Valid criticisms of evaluating performance based on return on investment (ROI) include managers may Blank______. - be put in charge of a business segment that includes committed costs over which a manager has no control - reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI - affect ROI by increasing sales or decreasing operating expenses for their division - take actions that increase ROI in the short-run at the expense of long-term performance
- be put in charge of a business segment that includes committed costs over which a manager has no control - reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI - take actions that increase ROI in the short-run at the expense of long-term performance
When a segment is eliminated, a ______. - common fixed cost will remain unchanged - traceable fixed cost will disappear - traceable fixed cost will remain unchanged - common fixed cost will disappear
- common fixed cost will remain unchanged - traceable fixed cost will disappear
Financial performance measures ______. - focus on past, not future performance - are all based on leading indicators - need to be integrated with nonfinancial measures in the balanced scorecard - are ordinarily the responsibility of lower-level managers in the organization
- focus on past, not future performance - need to be integrated with nonfinancial measures in the balanced scorecard
A company can increase its return on investment (ROI) by ______. - increasing sales - reducing operating expenses - increasing operating assets - borrowing additional funds
- increasing sales - reducing operating expenses
Financial performance measures ______. - are all based on leading indicators - need to be integrated with nonfinancial measures in the balanced scorecard - are ordinarily the responsibility of lower-level managers in the organization - focus on past, not future performance
- need to be integrated with nonfinancial measures in the balanced scorecard - focus on past, not future performance
Financial performance measures ______. - need to be integrated with nonfinancial measures in the balanced scorecard - are all based on leading indicators - are ordinarily the responsibility of lower-level managers in the organization - focus on past, not future performance
- need to be integrated with nonfinancial measures in the balanced scorecard - focus on past, not future performance
Financial performance measures ______. - need to be integrated with nonfinancial measures in the balanced scorecard - focus on past, not future performance - are all based on leading indicators - are ordinarily the responsibility of lower-level managers in the organization
- need to be integrated with nonfinancial measures in the balanced scorecard - focus on past, not future performance
Quick to Ship Company has a process time of 2 days and a throughput time of 8 days. The manufacturing cycle efficiency is ______.
0.25
T or F Adams, Inc. has found that their managers are reluctant to replace old equipment with new, updated equipment. To stop this practice, Adams should compute ROI using assets' net book values.
False
T or F Adams, Inc. has found that their managers are reluctant to replace old equipment with new, updated equipment. To stop this practice, Adams should compute ROI using assets' net book values.
False
T or F The standard hours per unit includes both direct and indirect labor hours.
False
T or F When preparing a flexible budget, total fixed costs and total variable costs will increase with an increase in the level of activity.
False
What budget shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?
Budgeted income statement
The elapsed time from when a customer order is received until the finished goods are shipped is known as the ________ _______ _______
delivery cycle time
The number of working hours required to satisfy the production budget is shown on the ______ ______ budget.
direct labor
Working hours required to satisfy the production budget are shown on the ______ budget.
direct labor
In a manufacturing company, the ________ ________ budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.
direct materals
In a manufacturing company, the ______ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories
direct materials
The cost of unsold units is computed on the ______ budget.
ending finished goods inventory
The material variance terms price and quantity are replaced with the terms ________ and_______ when computing direct labor variances.
rate; hours
The net operating income that an investment center earns above the minimum required return on its average operating assets is ______.
residual
The net operating income that an investment center earns above the minimum required return on its operating assets is its _______ income.
residual
The inability to compare divisions of different sizes is a major disadvantage of ______.
residual income only
Any part of an organization whose manager has control over and is accountable for all three centers (cost, profit, or investments) is a(n) ______ center.
responsibility
Any part of an organization whose manager has control over and is accountable for all three centers (cost, profit, or investments) is a(n) _______ center.
responsibility
Any part of an organization whose manager has control over and is accountable for all three centers (cost, profit, or investments) is a(n) _______ center.
responsibility
Any part of an organization whose manager has control over and is accountable for all three centers (cost, profit, or investments) is a(n) ________ center.
responsibility
Which of the following business segments would not be considered a cost center? Retail outlet Manufacturing facilities Accounting department Personnel department
retail outlet
The difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period is called a(n) __________ variance.
revenue or sales
Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate.
sales
Both the production and selling and administrative expense budgets are prepared using information directly from the _________ budget.
sales
The first step in the budgeting process is preparing the ______ budget.
sales
What is the proper order of a contribution format income statement?
sales variable expenses contribution margin fixed expenses net operating income
A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) _________ - ________ budget, or a participative budget, is in place.
self - imposed
Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management is an advantage of ______.
self-imposed budgeting
In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the ______ budget.
selling & administrative
Budgeted expenses for areas other than manufacturing are shown on the ______ budget.
selling and administrative
The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) _____ variance.
spending
A benchmark used in measuring performance is called a(n) __________.
standard
The amount of direct-labor hours that should be used to produce one unit of finished goods is the _______ hours per unit.
standard
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.
standard
When calculating the labor rate variance, multiply the actual hours worked with the _______ labor rate and subtract this figure from the product of the actual hours worked and the _______ labor rate.
standard actual
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
the variable
Operations are able to respond quickly to customers and changes in the environment in a decentralized organization because ______.
there are fewer managers that must be consulted before a decision is made
The standard rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
Companies use the ________ ______ cycle to evaluate and improve performance.
variance analysis
Gathering feedback to ensure that the plan is being followed is referred to as __________
control
The manager of a(n) ________ center does not have control over revenue or the use of investment funds.
cost
When creating an Excel budget and performing what-if analysis, it is generally easiest to ______.
create the budget with a budgeting assumption tab
Leading indicators of future financial success include ______.
customer satisfaction measures
An organization in which decision-making authority is spread throughout the organization is ______.
decentralized
Lower-level managers are empowered to make decisions in a ______ organization, which can ________ motivation and job satisfaction.
decentralized, increase
The Sweet Mimi Pie Company makes gourmet blackberry pies. The company originally budgeted to make 4,000 pies during the year but exceeded expectations and produced 4,200 pies. Additional information relates to the Sweet Mimi Pie Company: BUDGETED (STANDARDS): Direct Labor 1 DLH per pie at $10.00 per hour Direct Materials 2 pounds blackberries per pie at $3.00 per pound Variable Overhead POR $2.00 per DLH; total budgeted $8,000 ACTUAL RESULTS: Direct Materials Purchased and used 8,800 pounds of blackberries at $2.80 per pound Direct Labor 4,320 actual direct labor hours at $9.25 per hour Compute the direct labor time variance (direct labor efficiency variance).
$1,760 Favorable **
If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ________.
$120,000 ÷ 5,000 = $24 per unit × 4,500 = $108,000
!!!ABC, Inc.'s expected sales for the first six month of the year are as follows. January - $120,000 February - $150,000 March - $160,000 April - $200,000 May - $220,000 June - $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of March.
$156,000 Reason: 60% of March sales ($96,000) + 40% of February sales ($60,000) = $156,000
Carlos, Inc. requires a minimum rate of return of 10% on its average operating assets. The housewares department currently has average operating assets of $200,000 and a net operating income of $24,000. The department's residual income is $ _________.
$4,000 $24,000 - ($20,000 x 10%) = $4,000
Toys, Trinkets and More requires a minimum rate of return of 12% on its average operating assets. The toy department currently has average operating assets of $300,000 and a net operating income of $42,000. The department's residual income is $ _______.
$42,000 - ($300,000 x 12%) = $6,000
Comfy Cozy Chairs makes rockers that require $45 of direct materials and $37 of direct labor. Variable manufacturing overhead is $8 per rocker, and fixed manufacturing overhead totals $58,000. Variable selling and administrative costs are $15 per rocker, and fixed selling and administrative costs total $102,000. During the period, 2,000 rockers were produced and 1,640 were sold. The unit product cost using absorption costing is ______.
$45 + $37 + $8 + ($58,000 ÷ 2,000) = $119
The Matisse Company began operations on January 1, 2014. The following information relates to budgeted sales: January $60,000 February $70,000 March $50,000. The Matisse Company estimates that 20% of sales will be collected in cash on the day of the sale and 80% of sales will be on credit. The credit sales are expected to be collected based on: 30% collected in the month of sale 60% collected in the month following the sale 10% collected in the 2nd month following the sale. Cash collections for the month of February would be ________.
$59,600 **
Toys, Trinkets and More requires a minimum rate of return of 12% on its average operating assets. The toy department currently has average operating assets of $300,000 and a net operating income of $42,000. The department's residual income is $ _________. ********** Work this out
$6,000
The Matisse Co. is preparing a cash budget for the month of January. The following information has been gathered: January 1st - Beginning Cash Balance - $40,000 Long-term Assets Purchased & Paid for in January. - $40,000 Inventory Purchases in January - $20,000 (60% paid in January and 40% paid in February) Cash Collections during January - $100,000 1st Quarter Taxes - $2,000 (due and scheduled to be paid March 1st) Selling & Administrative Expenses - $6,000 in January (includes $1,000 depreciation expense) Insurance Expense - $4,000 (entire amount paid in January) The Matisse Co. would like to have at least $50,000 cash on hand at the end of January. The company has a $70,000 line of credit at the local bank. What are total cash disbursements for the month of January?
$61,000 **
Gavin, Inc. recorded the following information for one of its products. All amounts are in days: Wait time 5.0; Inspection time 0.7; Process time 2.5; Move time 0.4; Queue time 3.0. Gavin's delivery cycle time is ______ days.
11.6 days. Delivery cycle time = wait time + process time + inspection time + move time + queue time
ABC, Inc.'s expected sales for the first six month of the year are as follows. January - $120,000 February - $150,000 March - $160,000 April - $200,000 May - $220,000 June - $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of April.
40% of March sales ($64,000) + 60% of April sales ($120,000) = $184,000
JPL, Inc. recorded the following information for one of its products. All amounts are in days: Wait time 4.0; Inspection time 0.6; Process time 2.3; Move time 0.7; Queue time 3.1. JPL's throughput (manufacturing cycle) time is ______ days.
6.7 Throughput (manufacturing cycle) time = Process Time + Inspection Time + Move Time + Queue Time
Cash Budget
A detailed plan showing how cash resources will be acquired and used over a specific time period.
Sales Budget
A detailed schedule showing expected sales expressed in both dollars and units.
Which of the following statements is correct? - A manager might reject a proposal using ROI that the manager would accept using residual income. - A project that is not acceptable using residual income calculations may be acceptable when ROI is calculated. - Managers will be more likely to pursue projects that will benefit the entire company when being evaluated on ROI instead of residual income.
A manager might reject a proposal using ROI that the manager would accept using residual income.
Which of the following statements is correct? - Managers will be more likely to pursue projects that will benefit the entire company when being evaluated on ROI instead of residual income. - A project that is not acceptable using residual income calculations may be acceptable when ROI is calculated. - A manager might reject a proposal using ROI that the manager would accept using residual income.
A manager might reject a proposal using ROI that the manager would accept using residual income.
Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. The labor rate variance is ______.
AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U
When inventory increases, which costing method generally results in higher net income?
Absorption costing
Net income computed under ______ costing may not agree with the results of CVP analysis.
Absorption; CVP analysis requires that costs be broken down into fixed and variable components.
Garnett, Inc. has a required rate of return on new projects of 12%. The Western division of Garnett is currently earning a combined return on investment (ROI) of 14.5% on the projects in its division. Western's manager is considering a project that is projected to earn 13.25%. Which of the following statements regarding the manager's decision are correct? - Accepting the project is in the best interest of the company as a whole. - The project will improve the ROI for the Western division, since it is above the required rate of return that the company has specified. - The manager may decide to reject the project because it will lower the current ROI earned by his division.
Accepting the project is in the best interest of the company as a whole. The manager may decide to reject the project because it will lower the current ROI earned by his division.
Which of the following are used to calculate the standard quantity per unit of direct materials? Allowance for normal scrap and spoilage. Freight and transportation costs. Direct materials requirements per unit of finished product.
Allowance for normal scrap and spoilage. Direct materials requirements per unit of finished product.
Given on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500 Actual hours used 4,200 Standard hours allowed 4,000 Standard variable overhead rate $3.75 per hour.
Applied variable overhead cost is based on the actual hours so, applied overhead of $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 F.
T or F Control involves developing goals and preparing various budgets to achieve those goals.
False Reason: Control involves the steps taken by management to increase the likelihood that all parts of the organization are working to achieve the goals set down in the planning stage.
T or F For most companies a single, annual cash budget is sufficient.
False Monthly cash budgets are common and some companies may need budgets for shorter time periods to capture major cash fluctuations.
What are the four groups of performance measures typically used in the balanced scorecard approach?
Financial Customer Internal business process learning & growth
Which of the following performance measures are part of the balanced scorecard? Financial Vendor Learning and growth Customer
Financial Learning and growth Customer
Which of the following statements are true? - In order for employees to understand the importance of the balanced scorecard, incentive compensation should immediately be tied to it. - It is important that balanced scorecard measures are not easily manipulated. - Using balanced scorecard performance measures to reward employees can result in sub-optimal results.
It is important that balanced scorecard measures are not easily manipulated. Using balanced scorecard performance measures to reward employees can result in sub-optimal results.
A company with adequate cash balances at the beginning and end of the year, ______.
may still have cash deficiency issues during the year
The terms price and quantity are used when computing direct ______ variance, while the terms rate and hours are used when computing direct ___________ variances.
Materials Labor
EBIT is another term for _____.
Net operating income
Residual income =
Net operating income (NOI) - (Average operating assets × Minimum required rate of return)
Budgets are used for two distinct purposes: ______ and ______.
Planning Control
A(n) ______ _______ is the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input.
Quality Variance
Which of the following statements is not a weakness of using return on investment (ROI) to evaluate performance? - It may be difficult to assess the performance of a manager who takes over an existing business segment. - Managers may reject investment opportunities that would benefit the entire company but negatively affect the manager. - ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies. - Managers may increase ROI in a way that is inconsistent with company strategy.
ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies.
Which of the following statements is not a weakness of using return on investment (ROI) to evaluate performance? - It may be difficult to assess the performance of a manager who takes over an existing business segment. - ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies. - Managers may reject investment opportunities that would benefit the entire company but negatively affect the manager. - Managers may increase ROI in a way that is inconsistent with company strategy.
ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies.
Which of the following statements is not a weakness of using return on investment (ROI) to evaluate performance? - ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies. - Managers may increase ROI in a way that is inconsistent with company strategy. - It may be difficult to assess the performance of a manager who takes over an existing business segment. - Managers may reject investment opportunities that would benefit the entire company but negatively affect the manager.
ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies.
Net operating income - (Average operating assets × Minimum required rate of return) =
Residual Income
Net operating income ÷ Average operating assets = ______.
Return on investment
What evaluation measures are used for investment center managers only—not for cost or profit center managers?
Return on investment (ROI) Residual income
The master budget begins with the ______ budget.
Sales
Which budget would be prepared before the cash collections budget?
Sales Budget
T or F When evaluating a manger, residual income of zero is acceptable.
TRUE
Marcos Co. is considering a project that will increase residual income by $15,000. The project has a 12% return on investment (ROI) which exceeds the company's 10% required rate of return. Marcos Co. currently has an overall 15% ROI in the department where this project would be implemented. Which of the following statements regarding this potential investment are true? - The project should be rejected by the company because its ROI is lower than the current departmental ROI. - The department manager may not want to accept the project because it will lower the overall ROI for the department. - The project should be accepted because the residual income will help push the project's ROI above the projected 12%. - The project should be accepted by the company because it increases overall residual income.
The department manager may not want to accept the project because it will lower the overall ROI for the department. The project should be accepted by the company because it increases overall residual income.
Garnett, Inc. has a required rate of return on new projects of 12%. The Western division of Garnett is currently earning a combined return on investment (ROI) of 14.5% on the projects in its division. Western's manager is considering a project that is projected to earn 13.25%. Which of the following statements regarding the manager's decision are correct? - The manager may decide to reject the project because it will lower the current ROI earned by his division. - Accepting the project is in the best interest of the company as a whole. - The project will improve the ROI for the Western division, since it is above the required rate of return that the company has specified.
The manager may decide to reject the project because it will lower the current ROI earned by his division. Accepting the project is in the best interest of the company as a whole.
A quantity variance is ______.
calculated using the standard price of the input. A quantity variance looks at the difference between actual and standard quantities.
Identify the true statements about budgets. They provide each department with the same amount of money to spend, so that all departments are treated fairly. They coordinate the activities of the entire organization by integrating the plans of its various parts. They encourage managers to think about and plan for the future. They define goals and objectives that can serve as benchmarks for evaluating subsequent performance. The budgeting process can uncover potential bottlenecks before they occur.
They coordinate the activities of the entire organization by integrating the plans of its various parts. The budgeting process can uncover potential bottlenecks before they occur. They encourage managers to think about and plan for the future. They define goals and objectives that can serve as benchmarks for evaluating subsequent performance.
T or F A static budget is prepared for only one level of activity, whereas, a flexible budget is prepared for different levels of activity.
True
T or F Many of the schedules in a master budget are based on a variety of management estimates and assumptions.
True
T or F Under absorption costing, fixed overhead is treated like a variable cost because a portion of the total cost is allocated to each unit produced, rather than being expensed as one large sum.
True
A disadvantage of the residual income approach is that it ______.
cannot be used to evaluate different sized divisions.
Which of the following statements are correct? - When the workforce is basically fixed in the short term, managers must be cautious about how labor efficiency variances are used. - Companies should build inventory even if there is no immediate prospect of sale. - Excessive inventory leads to low defect rates. - Excessive inventory contributes to inefficient operations.
When the workforce is basically fixed in the short term, managers must be cautious about how labor efficiency variances are used. Excessive inventory contributes to inefficient operations.
An integrated set of performance measures that are derived from the company's strategy is ______.
a balanced scorecard
Costs are categorized by function when using _________ costing and by behavior when using ________ costing.
absorption variable
Operating assets include ______. - accounts receivable - equipment - land held for investment - inventory - investments in bonds
accounts receivable equipment inventory
The materials price variance is calculated using the ______ quantity of the input purchased.
actual
The material quantity variance measures the difference between the _______ quantity of materials used in production and the _________ quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials.
actual; standard
Required borrowings on a cash budget is calculated by:
adding the desired ending cash balance to the amount of the cash deficiency Desired ending cash balance + Cash Deficiency
When preparing a flexible budget, the level of activity ______.
affects variable costs only
The materials price variance is the difference between the actual price of materials __________.
and the standard price for materials with the difference multiplied by the actual quantity of materials.
Master budget schedules ______. may be prepared in any order. are based on estimates and assumptions. answer several key questions for a company.
are based on estimates and assumptions. answer several key questions for a company. **The master budget follows a specific sequence, starting with the sales budget.
The ROI formula typically uses ______.
average operating assets for the year
Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _______ ______ from last year.
balance sheet
Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _________ ________ from last year.
balance sheet
The annual master budget file includes the ______ from last year because it is needed for the schedule of expected cash collections.
balance sheet
To prepare a budgeted balance sheet as of December 31, 2021, data is needed from the ______ December 31, 2020.
balance sheet as of
A(n) _______ __________ consists of an integrated set of performance measures that are derived from and support a company's strategy.
balanced scorecard
An advantage of using a(n) ______ _________ is that it continually tests the theories underlying management strategies.
balanced scorecard
An advantage of using a(n) _______ __________ is that it continually tests the theories underlying management strategies.
balanced scorecard
An advantage of using a(n) ______ ______ is that it continually tests the theories underlying management strategies.
balanced; scorecard
Valid criticisms of evaluating performance based on return on investment (ROI) include managers may ______. - be put in charge of a business segment that includes committed costs over which a manager has no control - affect ROI by increasing sales or decreasing operating expenses for their division - reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI - take actions that increase ROI in the short-run at the expense of long-term performance
be put in charge of a business segment that includes committed costs over which a manager has no control reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI take actions that increase ROI in the short-run at the expense of long-term performance
A budgeted balance sheet is developed using data from the Blank______ of the budget period and data contained in the various schedules.
beginning
When a manager creates a budget that is too easy to attain, ______ occurs.
budgetary slack
Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?
budgeted income statement
Budgets ______.
communicate management's plan throughout the organization
When fewer hours are worked than the standard hours allows, the labor efficiency variance is _____.
favorable
When fewer hours are worked than the standard hours allows, the labor efficiency variance is ________.
favorable
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the _____ budget.
flexible
Excessive inventory on hand, especially in the work in process inventory account, may lead to ______. high defect rates price increases in direct materials inefficient operations obsolete goods
high defect rates inefficient operations obsolete goods
When units produced exceed units sold, net income will generally be ______ costing.
higher under absorption costing than under variable
When 100% peak effort from the most skilled and efficient workers is assumed, the direct labor hours required per unit is being set using _______ standards.
ideal
Many managers believe that being empowered to create their own self- __________ budgets is the most effective method of budget preparation.
imposed
A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted ________ ________.
income statement
In order to increase return on investment (ROI), the company must _______ (increase/decrease) sales, and/or ________ (increase/decrease) operating expenses and/or ________ (increase/decrease) average operating assets.
increase decrease decrease
In order to increase return on investment (ROI), the company must _____________ (increase/decrease) sales, and/or _____________ (increase/decrease) operating expenses and/or _____________ (increase/decrease) average operating assets.
increase decrease decrease
In order to increase return on investment (ROI), the company must ___________ sales, and/or __________ operating expenses and/or _________ average operating assets.
increase; decrease; decrease
Using net book value (instead of gross cost) to calculate average operating assets ______.
increases ROI over time
Using net book value (instead of gross cost) to calculate average operating assets _______.
increases ROI over time
Net operating income is income before __________ and _____________.
interest; taxes
Assembling products and handling baggage are examples of ______ processes.
internal business
What the company does in an attempt to satisfy customers falls into the ______ group of the balance scorecard.
internal business process
The manager of a(n) _______ center has control over costs, revenue, and investments in operating assets.
investment
When direct labor is used as the overhead allocation base, the variable overhead efficiency variance ______.
is favorable when the direct labor efficiency variance is favorable
!! SR(AH - SH) is the formula for the ______ variance.
labor efficiency
When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable _______ ______ variance may occur.
labor efficiency
Using budgeting assumptions when preparing the master budget, ______.
makes it easier to answer "what-if" questions
All costs of production other than direct materials and direct labor are shown on the ______ ______ budget.
manufacturing overhead
All costs of production other than direct materials and direct labor are shown on the ______ _______ budget.
manufacturing overhead
Computing ROI using the expanded model provides additional insights. ROI can be lowered by excessive operating expenses which can depress ________ and excessive operating assets which can depress _________.
margin; turnover
In order to fully understand how a manager's decisions can affect ROI, both _____ and _____ should be computed.
margin; turnover
In order to fully understand how a manager's decisions can affect ROI, both ______ and ________ should be computed.
margin; turnover
A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the _________ budget.
master
An integrated business plan that formally lays out the company's goals is called the ______ budget.
master
The terms price and quantity are used when computing direct _________ variance, while the terms rate and hours are used when computing direct ______ variances.
material labor
A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period is called a(n) _______ ________ budget.
merchandise purchases
The amount of goods to be acquired from suppliers during the period is shown on the ______ budget.
merchandise purchases
Managers of cost centers are expected to ______.
minimize costs, while providing an acceptable level of service
When managers are evaluated on residual income, rather than on return on investment (ROI), they will be Blank______ likely to pursue projects that will benefit the entire company.
more
When managers are evaluated on residual income, rather than on return on investment (ROI), they will be ______ likely to pursue projects that will benefit the entire company.
more
Variances are more accurate when using ________.
multiple cost dividers
ROI can be calculated as ______.
net operating income ÷ average operating assets margin × turnover
Compensation should ______.
only be tied to balanced scorecard measures after the organization has been successfully managed with it for some time
More accurate estimates and higher motivation are generally the result of using a(n) ______ budget.
participative
A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or ______ budget.
participative or participatory
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.
planning
Developing goals and preparing various budgets to achieve those goals is part of ______,
planning
An unfavorable labor efficiency variance can result from ______. - poor quality materials - faulty equipment - the payment of overtime premiums - unmotivated workers
poor quality materials faulty equipment unmotivated workers
Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions made to ______ products that are, in fact, profitable.
pricing; drop
The first line of the direct labor budget consists of the budgeted units expected to be ______ during the period.
produced
In a manufacturing company, the ______ budget is prepared right after the sales budget.
production
In a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.
production
In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget?
production
The materials quantity variance is generally the responsibility of the _________ department manager.
production
Comparing actual net income to budgeted net income is often done to evaluate the manager of a(n) __________ center.
profit
The manager of a(n) ______ center has control over both costs and revenues, but not over the use of investment funds.
profit
The difference between the actual amount of materials used in production and the standard amount of materials allowed for the actual output, multiplied by the standard price per unit of materials is the materials ________ variance.
quantity
Components of throughput time include ______ time.
queue process inspection
AH(AR - SR) is the formula for the variable overhead ________ variance.
rate
The difference between the standard and the actual direct labor wages per hour is reflected in the labor ________ variance.
rate
Borrowing money is required whenever ______. - there is a cash deficiency - the cash excess is greater than the minimum required cash balance - the cash excess is less than the minimum required cash balance - the cash excess equals the minimum required cash balance
there is a cash deficiency the cash excess is less than the minimum required cash balance
The manufacturing cycle efficiency (MCE) is computed by relating the value-added time to the ______ time.
throughput
The manufacturing cycle efficiency (MCE) is computed by relating the value-added time to the ________ time.
throughput
Budgetary slack occurs when a manager submits a budget that is _______.
too easy to attain
Computing ROI using the expanded model provides additional insights. ROI can be lowered by excessive operating expenses which can depress _________ and excessive operating assets which can depress _________.
turnover; margin
When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is ______.
unfavorable
The ending finished goods inventory budget computes the cost of ______ units.
unsold
The number of units produced does not affect net operating income when using ______ costing.
variable
A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______.
variable cost revenue