question

Form of planning that formalizes a company's goals and objectives in financial terms

answer

Budgeting

question

Financial planning for the intermediate time range involving decisions such as whether to buy or lease equipment, purchase additional assets, or increase operating expenses to stimulate sales

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Capital Budgeting

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A budget detailing expected future cash receipts and payments

answer

Cash Budget

question

The combination of the numerous separate but interdependent departmental budgets that detail a wide range of operating and financial plans including sales, production, manufacturing expenses, and administrative expenes

answer

Master Budget

question

Departmental budgets that become a part of the company's master budget typically include a sales budget, and inventory purchases budget, a selling and administrative expense budget, and a cash budget

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Operating Budgets

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Short-range planning activities such as the development and implementation of the master budget

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Operations Budgeting

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Results from combining numerous specific plans prepared by different departments

answer

Master Budget

question

The three levels of planning for business activity are:

answer

1. Strategic Planning 2. Capital Budgeting 3. Operations Budgeting

question

Strategic plans are _________ rather than quantitative

answer

Descriptive

question

A _________ __________ offers the advantage of keeping management constantly focused on thinking ahead to the next 12 months

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Perpetual Budget

question

____________ promotes planning and coordination; it enhances performance measurement and corrective action

answer

Budgeting

question

The master budget usually includes:

answer

1. Operating Budgets 2. Capital Budgets 3. Pro Forma Financial Statements

question

Operating budgeting concentrates on?

answer

Short-term plans

question

Based on projected rather than historical information

answer

Pro forma financial statements

question

Which of the following is not true? A) Actual sales greater than expected sales result in an unfavorable variance. B) Actual sales less than expected sales result in an unfavorable variance. C) Actual costs less than expected costs result in a favorable variance D) Actual costs greater than expected costs result in an unfavorable variance.

answer

A) Actual sales greater than expected sales result in an unfavorable variance.

question

The ability to attain the sales volume indicated in the master budget is usually referred to as: A) Creating the numbers B) Making the numbers C) Budgetary slack D) Achieving the numbers

answer

B) Making the numbers

question

Gary's Manufacturing Company had the following: Planned: Production 22,000 units Standards 100 lbs. @ $2.50/lb. = $250/unit Direct Labor 2 hrs/unit * $10/hour = $20/unit Variable Overhead $2.50/direct labor hour = $5/unit Fixed Overhead $698,500 Actual: Production 24,000 units Material used 2,640,000 lbs @ $2.40/lb Direct Labor 49,000 hours total $465,500 Variable Overhead $128,000 Fixed Overhead $750,000 Calculate the materials usage variance. A) $600,000 U B) $600,000 F C) $264,000 U D) $264,000 F

answer

A) $600,000 U

question

Gary's Manufacturing Company had the following: Planned: Production 22,000 units Standards 100 lbs. @ $2.50/lb. = $250/unit Direct Labor 2 hrs/unit * $10/hour = $20/unit Variable Overhead $2.50/direct labor hour = $5/unit Fixed Overhead $698,500 Actual: Production 24,000 units Material used 2,640,000 lbs @ $2.40/lb Direct Labor 49,000 hours total $465,500 Variable Overhead $128,000 Fixed Overhead $750,000 Calculate the materials price variance. A) $600,000 U B) $600,000 F C) $264,000 U D) $264,000 F

answer

D) $264,000 F

question

Which of the following persons would be held accountable for the materials price variance? A) Production Foreman B) Assembly Manager C) Assembly Workers D) Purchasing Manager

answer

D) Purchasing Manager

question

Gary's Manufacturing Company had the following: Planned: Production 22,000 units Standards 100 lbs. @ $2.50/lb. = $250/unit Direct Labor 2 hrs/unit * $10/hour = $20/unit Variable Overhead $2.50/direct labor hour = $5/unit Fixed Overhead $698,500 Actual: Production 24,000 units Material used 2,640,000 lbs @ $2.40/lb Direct Labor 49,000 hours total $465,500 Variable Overhead $128,000 Fixed Overhead $750,000 Calculate the labor price variance. A) $24,500 U B) $24,500 F C) $ 5,000 U D) $ 5,000 F

answer

B) $24,500 F

question

Gary's Manufacturing Company had the following: Planned: Production 22,000 units Standards 100 lbs. @ $2.50/lb. = $250/unit Direct Labor 2 hrs/unit * $10/hour = $20/unit Variable Overhead $2.50/direct labor hour = $5/unit Fixed Overhead $698,500 Actual: Production 24,000 units Material used 2,640,000 lbs @ $2.40/lb Direct Labor 49,000 hours total $465,500 Variable Overhead $128,000 Fixed Overhead $750,000 Calculate the labor usage variance. A) $24,500 U B) $24,500 F C) $10,000 U D) $10,000 F

answer

C) $10,000 U

question

Gary's Manufacturing Company had the following: Planned: Production 22,000 units Standards 100 lbs. @ $2.50/lb. = $250/unit Direct Labor 2 hrs/unit * $10/hour = $20/unit Variable Overhead $2.50/direct labor hour = $5/unit Fixed Overhead $698,500 Actual: Production 24,000 units Material used 2,640,000 lbs @ $2.40/lb Direct Labor 49,000 hours total $465,500 Variable Overhead $128,000 Fixed Overhead $750,000 Calculate the fixed overhead spending variance. A) $63,500 F B) $63,500 U C) $51,500 F D) $51,500 U

answer

D) $51,500 U

question

The practice of intentionally understating expected sales volume is referred to as: A) Lowballing B) Highballing C) Budgetary slack D) Budgetary overstatement

answer

A) Lowballing

question

When evaluating operations management sometimes uses the difference between expected and actual performance. This is referred to as: A) Management by Expectations. B) Management by Deception. C) Management by Objective D) Management by Exception.

answer

D) Management by Exception.

question

A primary advantage of a standard cost system is the efficient use for management to control costs. Secondary advantages include all of the following except: A) Alerting management to trouble spots. B) Boosting morale and motivating employees. C) Allowing employees to optimize resources thereby minimizing waste and reducing costs. D) Encourage good planning.

answer

C) Allowing employees to optimize resources thereby minimizing waste and reducing costs.

question

Which of the following is a group of detailed budgets and schedules representing the company's operating and financial plans for a future accounting period? A) Perpetual budget B) Capital budget C) Master budget D) Continuous budget

answer

C) Master budget

question

Which of the following best defines budgeting? A) Budgeting is planning. B) Budgeting is communicating objectives and controlling outcomes. C) Budgeting is communicating specific plans in financial terms. D) Budgeting is communicating planned objectives.

answer

C) Budgeting is communicating specific plans in financial terms

question

A budgeting process in which information is constantly updated to provide a glance at a future 12-month period is referred to as: A) Continuous budgeting B) Participative budgeting C) Strategic budgeting D) Joint budgeting

answer

A) Continuous budgeting

question

Capital budgeting A) Focuses on vague goals. B) Focuses on short term planning. C) Focuses on intermediate planning. D) Focuses on long-term planning.

answer

B) Focuses on short term planning.

question

The preparation of the master budget begins with the: A) Sales budget B) Sales forecast C) Expected net income D) Ending cash balance

answer

B) Sales forecast

question

The sales budget provides direct input to the computation of: A) Cash payments B) Cash receipts C) Cash balance D) Net income

answer

B) Cash receipts

question

To determine total inventory needed, the cost of budgeted sales is: A) Added to desired ending inventory. B) Subtracted from desired ending inventory. C) Added to beginning inventory. D) Subtracted from desired beginning inventory.

answer

A) Added to desired ending inventory.

question

Total cost determined by multiplying the predetermined overhead rate times the actual volume of production

answer

Applied Fixed Cost

question

Difference between inflated and realistic standards

answer

Budget Slack

question

The difference between the actual fixed manufacturing overhead costs and the budgeted fixed manufacturing overhead costs

answer

Fixed Cost Spending Variance

question

The difference between the budgeted fixed manufacturing overhead costs and the applied fixed manufacturing overhead costs

answer

Fixed Cost Volume Variance

question

Budgets that show expected revenues and costs at a variety of different activity levels

answer

Flexible Budgets

question

Differences between budgets based on standard amounts at the actual level of activity and actual results; caused by differences between standard unit cost and actual unit cost at the volume of activity acheived

answer

Flexible Budget Variance

question

A measure of the highest level of efficiency attainable; assumes all input factors interact perfectly under ideal or optimum conditions

answer

Ideal Standard

question

Standard cost variances that indicates how the actual pay rate for direct labor differs from the standard pay rate

answer

Labor Price Variance

question

Standard cost variance that indicates how the actual amount of direct labor used differs from the standard amount required

answer

Labor Usage Variance

question

Easily attainable goals that can be reached with minimal effort

answer

Lax Standards

question

Expression that indicates marketing managers attained the planned master budget sales volume

answer

Making the Numbers

question

The philosophy of focusing management attention and resources only on those operations where performance deviates significantly from expectations

answer

Management by Exception

question

A variance sufficiently significant that its investigation could influence decision making

answer

Material Variance

question

Standard cost variance that indicates how the actual price paid for raw materials differs from the standard price for the materials

answer

Materials Price Variance

question

Standard cost variance that indicates how the actual amount of raw materials used to make products differs from the standard amount required

answer

Materials Usage Variance

question

A measure of efficiency in which the ideal standard has been modified to allow for normal tolerable inefficiencies

answer

Practical Standard

question

Allocation rate calculated before actual costs or activity are known; determined by dividing the estimated overhead costs for the coming period by some measure of estimated total production activity for the period, such as the number of labor hours or machine hours. The base should relate rationally to overhead use. The rate is used throughout the accounting period to allocate overhead costs to work-in-process inventory based on actual production activity

answer

Predetermined Overhead Rate

question

Variance attributable to the actual sales price differing from the standard sales price; calculated as the difference between actual sales revenue and flexible budget sales revenue (The standard sales price per unit times the actual number of units sold)

answer

Sales Price Variance

question

Variance attributable to the actual sales price differing from the budgeted volume of sales; calculated as the difference between that static budget (standard sales price times standard level of activity) and the flexible budget (standard sales price times actual level of activity)

answer

Sales Volume Variance

question

Budgeted per-unit selling prices or costs that are based on anticipated circumstances; multiplying the per-unit standards for cost and quantity produces the per-unit standard cost

answer

Standards

question

A budget solely on the planned level of activity, such as the master budget; not adjusted for changes in activity volume

answer

Static Budget

question

The difference between a variable cost calculated at the planned volume of activity and the same variable cost calculated at the actual volume of activity

answer

Variable Cost Volume Variance

question

Differences between standard (budgeted) and actual amounts

answer

Variances

question

Flexible budgets differ from static budgets in that they show expected revenues and costs at a __________ of volume levels

answer

Variety

question

Sales Revenue Formula

answer

Expected sales price per unit X The planned volume of activity = Sales Revenue

question

Allocation Rate Formula

answer

Budgeted fixed cost / Planned volume of activity =

question

Predetermined overhead rate formula

answer

Budgeted fixed cost from the static budget / Planned volume of activity = predetermined overhead rate

question

If actual costs are less than the budgeted costs, the variance is _________

answer

Favorable

question

If actual costs are greater than the budgeted costs, the variance is _____________

answer

Unfavorable

question

Fixed cost volume variance formula

answer

applied fixed cost based on actual volume - budgeted fixed cost based on planned volume = fixed cost volume variance

question

Price Variance formula

answer

|actual price - standard price| X actual quantity =

question

Usage variance formula

answer

|actual quantity - standard quantity| X standard price =

question

Labor price variance formula

answer

|Actual rate - standard rate| X actual quantity =

question

Labor usage variance formula

answer

|actual quantity - standard quantity| X standard rate =

Fundamental Managerial Accounting Concepts 7th Edition CH 7-8 Test Review – Flashcards

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