MANAGERIAL ACCOUNTING EXAM TWO

If company A has a higher degree of operating leverage than company B, then:

Company A's profits are more sensitive to percentage changes in sales

Garth Company sells a single product. If the selling price per unit and the variable expense per unit both decrease and fixed expenses do not change, then:

Contribution margin per unit: decreases Contribution margin ratio: no change Break-even in units: increases

Garth Company sells a single product. If the selling price per unit and the variable expense per unit both decreases and fixed expenses do not change, then:

Contribution margin per unit: decreases Contribution margin ratio: no change Break-even units: increases

George Company has no beginning inventory and manufactures a single product. If the number of units produced exceeds the number of units sold, than net operating income under the absorption method for the year will:

be greater than the net operating income under variable costing.

George Company has no beginning inventory and manufactures a single product. If the number of units produced exceeds the number of units sold, then net operating income under the absorption method for the year will:

be greater than the net operating income under variable costing.

A static budget:

is valid for only one level of activity.

Discretionary fixed costs:

may be reduced for short periods of time with minimal damage to the long-run goals of the organization.

which of the following budgets are prepared before the sales budget?

nothing is prepared before the sales budget

The budget or schedule that provides necessary input data for the direct labor budget is the:

production 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

the margin of safety is equal to:

sales - (fixed expenses / contribution margin ratio)

the break-even in units sold will decrease if there is an increase in:

selling price

All other things equal, if a division's traceable fixed expenses decrease:

the division's segment margin will increase.

Net operating income computed under absorption costing would exceed net operating income computed using variable costing if:

units sold are less than units produced.

Contribution margins means:

what remains from total sales after deducting all variable expenses.

When the level of activity increases within the relevant range, how does each of the following change?

Average cost per unit: decreases Total variable cost: increases Fixed cost per unit: decreases

Net income determined using full absorption costing can be reconciled to net income determined using variable costing by computing the difference between:

Fixed manufacturing overhead costs deferred in or released from inventories.

Which of the following are benefits of decentralization?

Giving a manager of a division greater decision making control over his/her division provides vital training for a manager who is on the rise in the company. Added decision-making authority and responsibility often leads to increased job satisfaction and often persuades a manager to put forth his/her best efforts.

Which of the following are considered to be product costs under variable costing? I. Variable manufacturing overhead. II Fixed manufacturing overhead. III. Selling expenses.

I

In calculating the break-even point for a multi-product company, which of the following assumptions are commonly made? I. Total fixed costs are constant II. Variable expenses are constant per unit. III. A given sales mix is maintained for all volume changes.

I. Total fixed costs are constant II. Variable expenses are constant per unit. III. A given sales mix is maintained for all volume changes.

Which of the following is not a benefit of budgeting?

It ensures that accounting records comply with generally accepted accounting principles.

Which of the following is not a benefit of budgeting?

It reduces the need for tracking actual cost activity.

Benefits of budgeting

It sets benchmarks for performance evaluation. It uncovers potential bottlenecks. It formalizes a manager's planning efforts.

Benefits of budgeting

It sets benchmarks for performance evaluation. It uncovers potential bottlenecks. It formalizes a manager's planning efforts.

Which of the following statements is not correct?

The cash budget must be prepared prior to the sales budget since managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

If the sales price per unit increases while the variable cost per unit and total fixed costs remain constant, which of the following statements is true?

The contribution margin increases and the breakeven point decreases.

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.

Correct statements

The sales budget is the starting point in preparing the master budget. The sales budget is constructed by multiplying the expected sales in units by the sales price. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.

Correct statements

The sales budget is the starting point in preparing the master budget. The sales budget is constructed by multiplying the expected sales in units by the sales price. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.

Administrative expenses are considered to be:

a period cost under variable costing.

Contribution margin is the excess of revenues over:

all variable costs

When a flexible budget is used, a decrease in the activity level would:

decrease total cost

Which of the following costs at a manufacturing company would be treated as a product cost under variable costing?

direct materials cost

Net income is the amount remaining after:

fixed expenses have been deducted from contribution margin.