accounting test 3 – Flashcards
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Which of the following is not a product cost?
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Advertising costs.
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Using a traditional costing approach which of the following manufacturing costs are assigned to products?
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Variable manufacturing overhead, direct materials, direct labor and fixed manufacturing overhead.
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Which of the following statements is true regarding absorption costing?
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It assigns all manufacturing costs to products.
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Which of the following statements is true regarding variable costing?
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Only manufacturing costs that change in total with changes in production level are included
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Which of the following statements is true?
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Variable costing treats fixed overhead as a period cost.
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Which of the following statements is true?
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A per unit cost that is constant at all production levels is a variable cost per unit.
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Under absorption costing, which of the following statements is not true?
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Fixed inventory costs are treated in the same manner as they are under variable costing.
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When evaluating a special order, management should:
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Only accept the order if the incremental revenue exceeds total variable product costs.
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Which of the following best describes costs assigned to the product under the absorption costing method?
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DL, DM, variable manufacturing overhead, and fixed manufacturing overhead.
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Which of the following best describes costs assigned to the product under the variable costing method?
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DL, DM, and variable manufacturing overhead.
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A cost that remains the same in total even when volume of activity varies is a:
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Fixed cost
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A cost that changes in total proportionately to changes in volume of activity is an:
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Variable cost
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A cost that changes with volume, but not at a constant rate, is called a:
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Curvilinear cost
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A cost that remains constant over a limited range of volume but increases by a lump sums when volume increases beyond a maximum amour is a:
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Step-wise cost
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A cost that can be separated into fixed and variable components is called a:
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Mixed cost
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Curvilinear costs always increase:
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When volume increases but not at a constant rate.
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Which one of the following statements is not true?
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Total variable costs decrease as the volume increases
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An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:
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Cost-volume-profit analysis.
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A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:
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Relevant range.
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A term describing a firm's normal range of operating activities is:
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Relevant range of operations.
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Cost-volume profit analysis is based on three basic assumptions. Which of the following is not one of these assumptions?
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Curvilinear costs change proportionately with changes in volume throughout the relevant rang.
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A target income refers to:
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Income planned for a future period.
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The margin of safety is the excess of :
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Expected sales over break-even sales.
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The excess of expected sales over the sales level at the break-even point is know as the:
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Margin of safety.
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A formal statement of future plans, usually expressed in monetary terms, is a:
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Budget
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The process of planning future business actions and expressing them as a formal plan is called
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Budgeting
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Effective budgeting requires all of the following except:
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Determination of budgets by to levels of management.
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Which of the following is not a benefit of following a well-designed budgeting process?
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Assurance of future profits.
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Which of the following is not a benefit derived from budgeting?
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Budgeting ensures the achievement of all goals.
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Which of the following statements about budgeting is false?
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The master budget should only be prepared by top management.
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A budget is best described as:
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A formal statement of a company's future plans usually expressed in monetary terms.
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Preparing a master budget is usually the responsibility of:
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A budget committee
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The most useful budget figures are developed:
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From the bottom up following a participatory process.
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The overall coordinating activity of the budget process is the responsibility of the:
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Budget committee
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The set of periodic budgets that are prepared and periodically revised in the practice of continuous budgeting is called:
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Rolling budgets
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The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed, adding a new budget each period so that the budgets always cover the same number of future periods, is called:
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Continuous budgeting
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The usual budget period is:
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An annual period separated into quarterly and monthly budgets.
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Operating budgets include all the following budgets except the:
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Cash budget.
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Which of the following is a financial budget?
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Budgeted balance sheet.
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The master budget includes:
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Operating budgets, a capital expenditure budget, and financial budgets.
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The usual starting point for preparing a master budget is forecasting or estimating:
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Sales
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A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expense to be incurred, the long-term assets to be purchased, and the amours of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:
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Master budget
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The master budget process usually ends with:
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The budgeted balance sheet.
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Which of the following budgets is not an operating budget?
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Cash budget
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A budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities is:
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Activity-based budgeting
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A plan that lists the types and amounts of general and administrative expenses expected during the budget period is referred to as a:
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General and administrative expense budget.
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A plan that lists dollar amounts to be received from disposing of plant assets and dollar amount to be spent on purchasing additional plant assets is called a:
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Capital expenditures budget
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A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:
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Merchandise purchases budget
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A plan showing the units of goods to be sold and the revenue to be derived from sales that is the usual starting point in the budgeting process, is called:
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Sales budget
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A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n):
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Selling expense budget
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Which of the following factors is least likely to be considered in preparing a sales budget
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The capital expenditures budget.
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A quantity of merchandise or materials over the minimum needed reduce the risk of running short is called:
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Safety stock.
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When preparing the cash budget all of the following should be considered except:
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Depreciation expense.
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A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n):
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Cash budget
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Which budget must be completed after a cash budget is prepared?
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Budgeted income statement
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Which of the following would not be used in preparing a cash budget for October?
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Estimated depreciation expense for October.
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A managerial accounting report that presents predicted amours of the company's revenues and expenses for the budget period is called a:
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Budgeted income statement.
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A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n):
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Budgeted balance sheet
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In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:
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The sales budget.
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A Long-term liability data for the budgeted balance sheet is derived from:
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The cash budget and capital expenditures budget.
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In preparing financial budgets:
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The budgeted balance sheet is usually prepared last.
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To determine the production budget for an accounting period, consideration is not given to which of the following:
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Budgeted overhead.
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A plan that shows the predicted costs for direct materials, direct labor, and overhead to be incurred in manufacturing the units in the production budget is called the:
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Manufacturing budget.
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A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:
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Productions budget
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Standard costs are:
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Preset costs for delivering a product or service under normal conditions.
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The costs that should be incurred under normal conditions to produce a specific product or component or to perform a specific service are:
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Standard costs
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Standard costs are used to measure:
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Price and quantity variances.
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The difference between actual and standard cost caused by the difference between the actual price and the standard price is called the:
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Price variance.
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The difference between actual and standard cost caused by the difference between the actual quantity and the standard quantity is called the:
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Quantity variance.
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The difference between the actual cost incurred and the standard cost is called the:
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Cost variance.
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A process of examining the differences between actual and budgeted costs and describing them in terms of the amounts that resulted from price and quantity differences is called:
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Cost variance analysis.
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An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as:
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Management by exception.
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A planning budget based on a single predicted amount of sales or production volume is called a:
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Fixed budget
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A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a:
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Flexible budget.
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An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity) and that presents the differences between actual and budgeted amounts as variances is called a(n):
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Flexible budget performance report.
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Static budget is another name for:
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Fixed budget
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Variable budget is another name for
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Flexible Budget
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An internal report that compares actual cost and sales amours with budgeted amounts and identifies the differences between them as favorable or unfavorable variances is called a:
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Performance report.
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A performance report compares the differences between:
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Actual results and predicted results.
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Sales analysis is useful for:
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Planning and control purposes.
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A flexible budget is prepared:
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At any time in the planning period.
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Which department is often responsible for the direct materials price variance?
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The purchasing department.
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Overhead cost variance is:
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The difference between the actual overhead incurred during a period and the standard overhead applied.
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Which of the following variances is not used in a standard cost system?
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Fixed overhead efficiency variance.
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The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the:
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Controllable variance
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The difference between the total budgeted overhead cost and the overhead applied to production using the predetermined overhead rate is the:
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Volume variance
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Regarding overhead costs, as volume increases:
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Unit fixed cost decreases, unit variable cost remains constant.
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When recording variances in a standard cost system:
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All unfavorable material and labor variances are credited.
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When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be:
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Closed to cost of goods sold.
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Which of the following would not be considered a cost center?
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Pharmacy in a grocery store.
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Which of the following is most likely to be considered a profit center?
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The grocery department of a Walmart Supercenter or Target Superstore
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A unit of a business that not only incurs costs but also generates revenues is called a:
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Profit center.
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A profit center:
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Incurs costs and directly generates revenues
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An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:
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Departmental accounting system.
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A department that incurs cost without directly generating revenues is a:
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Cost center
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Regardless of the system used in departmental cost analysis:
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Indirect costs are allocated, direct costs are not
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An expense that does not require allocation between departments is a(n):
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Direct expense.
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Expenses that are easily traced and assigned to specific department because they are incurred for the sole benefit of that department are called:
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Direct expenses
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Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:
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Indirect expenses
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The salaries of employees who spend all their time working in one department are:
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Direct expenses
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A difficult problem in calculating the total costs and expenses of a department is:
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Assigning indirect expenses to the department.
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The allocation bases for assigning indirect costs include:
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Any appropriate and reasonable bases.
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The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:
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Total sales of each department
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Costs that the manager has the power to determine or at least strongly influence are called:
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Controllable costs
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A report that specifies the expected and actual costs under the control of a manger is a:
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Responsibility accounting report.
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An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:
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Responsibility accounting system.
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Costs that the manager does not have the power to determine or strongly influence are:
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Uncontrollable costs
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Within an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:
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A cost center manager
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The most useful evaluation of a manager's cost performance is based on:
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Controllable costs.
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Which of the following would not appear on a responsibility accounting performance report?
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Uncontrollable costs
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In a responsibility accounting system:
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Controllable costs are assigned to managers who are responsible for them.
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Responsibility accounting performance reports:
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Become less detailed at higher levels of management.
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A responsibility accounting performance report documents:
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Both actual costs and budgeted costs.
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A responsibility accounting report that compares actual costs and expenses for a department with the budgeted amounts is called a(n):
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Performance report
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A responsibility accounting system:
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Can be applied at any level of an organization.
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Under which of the following conditions is a market-based transfer price likely to be used?
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There is no excess capacity.
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A single cost incurred in producing or purchasing two or more essentially different products is a:
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Joint cost
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Allocations of joint product costs can be based on the relative market values of the products:
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At the time the products are separated.
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Allocating joint costs to products can be based on their relative:
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Market values
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Which of the following is an example of a performance measure of internal business processes that would be found in a balanced scorecard:
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Product defect rates
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Which of the following is an example of a performance measure of the customer perspective that would be found in a balanced scorecard?
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Number of new customers.
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Which of the following is an example of a financial performance measure that would be found in a balance scorecard?
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Residual income
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Which of the following is an example of a financial performance measure that would be found in a balance scorecard?
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Return on investment.
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In the preparation of departmental income statements, the preparer completes the following steps in the following order:
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Identify direct expenses; allocate indirect expenses; allocate service department expenses.
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The amount by which a department's revenues exceed its direct costs and expenses is the:
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Departmental contribution to overhead.
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Departmental contribution to overhead is calculated as revenues of the department less:
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Direct costs and expenses.
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Process time is the time:
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Spent producing the product
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Wait time is the time:
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That an order or job sits with no production applied to it.
