Managerial Accounting Test – Flashcards
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What are some advantages of budgets?
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1. Budgets communicate management's plans throughout the organization. 2. Budgets force managers to think about and plan for the future. In the absence of the necessity to prepare a budget, many managers would spend all of their time dealing with day-to-day emergencies. 3. The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively. 4. The budgeting process can uncover potential bottlenecks before they occur. 5. Budgets coordinate the activities of the entire organization by integrating the plans of its various parts. Budgeting helps to ensure that everyone in the organization is pulling in the same direction. 6. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.
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What is a budget?
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A budget is a detailed quantitative plan for the acquisition and use of financial and other resources over a given time period. Budgetary control involves using budgets to increase the likelihood that all parts of an organization are working together to achieve the goals set down in the planning stage.
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The materials purchase budget should?
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Provide for desired ending inventory as well as for production.
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The budget that provides necessary input data for direct labor is the?
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Production Budget
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What best describes the production budget?
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It is calculated based on the sales budget and the desired ending inventory.
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The cash budget is developed from the budgeted income statement?
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False
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The main difference between a flexible budget and a static budget is that a flexible budget does not contain fixed costs?
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False
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A flexible budget is an estimate of what revenues and costs should have been, given the level of activity that had been planned for the period?
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False
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A flexible budget is a budget that?
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Is updated to reflect the actual level of activity during the period.
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A revenue variance is unfavorable if the actual revenue is less than what the revenue should have been for the actual level of the activity for the period.
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True
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Which of the following comparisons best isolates the impact that changes in prices of inputs and outputs have on performance?
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Flexible budget and actual results.
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If the actual level of activity is 4% less than planned, then the costs in the static budget should be reduced by 4% before comparing them to actual costs.
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False
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Which of the following statements concerning practical standards is incorrect?
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When practical standards are used, there is no reason to adjust standards if an old machine is replaced by a newer, faster machine.
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A favorable materials price variance coupled with an unfavorable materials usage variance would Most likely result from?
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The purchase of low quality materials.
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A favorable labor rate variance indicates?
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The standard rate exceeds the actual rate.
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If variable overhead is applied on the basis of direct-labor-hours and the variable overhead rate variance is favorable then:
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Standard variable overhead rate exceeded the actual rate.
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Management by exception means that a manager's attention is directed toward those parts of the organization where things are not proceeding according to plans.
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True
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All cost variances should be considered exceptions that require the attention of management?
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False
