Managerial Accounting Exam 3 Questions – Flashcards
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The decision-making approach in which a manager considers only costs and benefits that differ for alternatives is called:
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- Incremental Analysis - Differential Analysis
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What is NOT a step of the management decision-making process?
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Contact competitors who have made similar decisions
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Sunk costs are always:
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Irrelevant
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When making a one-time special-order decision, a company can ignore fixed overhead because:
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The cost will be incurred regardless of the decision
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When making make-or-buy decisions, managers should consider:
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- Alternate uses for any facility currently being used to make the item - The costs of direct materials included in making the item - Qualitative factors such as whether the supplier can deliver the item on time and to the company's quality standards
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What is NOT likely to be completely eliminated by a decision to drop a product line?
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The common fixed costs allocated to that product line
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What causes opportunity costs to become relevant to management decisions?
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Operating at full capacity
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What could be a constrained resource?
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- Machine hours - Direct materials - Factory space
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When resources are constrained, managers should prioritize products in order to maximize:
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Contribution margin per unit of the constrained resource
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What is NOT an important qualitative factor?
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Cost per unit
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Budgets help companies:
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- Meet short-term objectives - Meet long-term objectives
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What phases of the management process are impacted by budgeting?
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- Planning - Directing/leading - Controlling
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What following statement is true?
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Most companies would benefit from budgeting
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Shasta Company plans to double its profits in five years. This is an example of a:
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Long-term objective
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What is NOT considered a direct benefit of budgeting?
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Developing new product lines
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What budget would be prepared earliest in a company's budgeting process?
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Production budget
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What budget is affected by the sales budget?
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- Direct labor budget - Cash receipts and payments budget - Selling and administrative budget
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ABC Company expects to sell 100,000 units of its primary product in January. Expected beginning and ending finished goods inventory for January are 20,000 and 45,000 units, respectively. How many units should ABC produce?
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125,000
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What is NOT considered an operating budget?
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Cash budget
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Raya Company is calculating its expected cash receipts for the month of June. This should NOT include:
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Credit sales made during July
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In general, variances tell managers:
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Whether budgeted goals are being achieved
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In distinguishing between budgets and standards, what statement is true?
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Standards are used to develop budgets
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Variances are always noted as favorable or unfavorable. What do these terms indicate?
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Whether actual results are more or less than standard or budgeted amounts
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What type of budget is an integrated set of operating and financial budgets that reflects managements' expectations for a given sales level, and what type shows how budgeted costs and revenues will change across different levels of sales volume?
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- Master budget - Flexible budget
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When computing spending variances, actual results are compared to:
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The flexible budget
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Spending variances may be separated into:
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Price and quantity variances
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Temecula Company has calculated its direct materials price variance to be $1,000 favorable and its direct materials quantity variance to be $3,000 unfavorable. What could explain both of these variances?
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The purchases manager bought less expensive raw materials but they were of lower quality
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In producing its product, Ranger Company used 1,500 hours of direct labor at an actual cost of $15 per hour. The standard for Ranger's production level is 1,400 hours at $14 per hour. What is Ranger's direct labor rate variance?
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$1500 unfavorable
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Refer to the preceding question about Ranger Company. In producing its product, Ranger Company used 1,500 pounds of direct materials at an actual cost of $1.50 per pound. The standard for Ranger's production level was 1,400 pounds at $1.40 per pound. What is Ranger's direct materials quantity variance?
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$140 unfavorable
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An unfavorable fixed overhead volume or capacity variance indicates that a company:
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Manufactured fewer units than it expected
