Acc 202 Final

what is true regarding static budgets

* They are most effective when the actual level of activity is close to the budgeted level.
* They are less adaptable to changes in operating conditions.
* **They are based on a single projected level of activity.**
* best for fixed costs

what is false regarding static budgets

They are most appropriate for variable costs and expenses.

what are the steps of a flexible budget?

1. Identify the activity index and the relevant range.
2. Identify variable costs and computed the budgeted variable cost per unit.
3. Identify fixed costs and determine the budgeted amount for each.
4. Prepare the budget for selected activity levels within the relevant range.

what amounts appear on a flexible budget report?

Budgeted amounts for the actual activity level achieved.

There are fewer controllable costs at higher levels of management.

false

Management by exception means:

only material differences will be investigated.

cost center

(lowest level)

* Incurs costs and expenses only
* Usually service or production departments

profit center

(middle)

* Incurs costs and earns revenue
* Individual departments of a retail store

investment center

(highest)

* Incurs costs, earns revenues and manages assets
* Subsidiary companies

Controllable margin is computed as:

contribution margin- controllable fixed costs

The primary measure for a profit center manager is:

controllable margin.

How can a manager improve return on investment (ROI)?

decrease variable costs

What is not a benefit of budgeting?

It guarantees the company will meet its goals

what are some benefits of budgeting?

* It helps coordinate activities within the organization
* It requires managers to look ahead.
* It provides a basis for evaluating performance

While the budget may be based on any time period, the most common is one year.

true

Which of the following is a disadvantage of participative budgeting?

It can be time consuming.

Which budget is that starting point and impacts all other budgets?

sales budget

Accuracy is not a large factor when estimating the amount of inventory.

false

Which operating budget does not require estimates of inventory?

Direct Labor Budget

The culmination of the operating budgets is the budgeted balance sheet.

False

Which is the most important **financial** budget?

The cash budget

Which of the following is NOT a section of the cash budget?

investing

what are the benefits of the cash budget?

* leads to more effective cash management.
* It can predict if additional financing is needed.
* It can indicate when extra cash is available to invest.

Overhead costs can be easily and directly traced to individual products.

False

what is the steps of activity-based costing in the correct order?

1. Identify and classify activities and allocated overhead into cost pools.
2. Identify cost driver of each cost pool and estimate its usage.
3. Compute the activity overhead rate.
4. Assign overhead costs to products.

There should be a high degree of correlation between the cost driver and the actual consumption of costs in the cost pool.

true

what are the benefits of ABC costing

* ABC helps management make better decisions


* ABC gives better control over overhead costs.
* ABC results in more accurate product costing.

what is not a benefit of ABC costing

ABC is simpler to implement than traditional costing.

unit level activities

* Assembling a product
* Performed for each unit of product

batch-level activities

* Performed every time a batch of a product
* Equipment setup

product level activities

* Product design
* Performed every time a new product is developed

factory level activities

* Utilities
* Required to support an entire production process

ordering & receiving

Number of purchase orders

Assembling

Number of parts

Machine setup

Number of setups

Inspections and testing

Number of tests

Which of the following would indicate that a company should consider using activity-based costing?

The company has shifted from labor-intensive to capital-intensive manufacturing processes.

Which of the following is a value-added activity?

assembling a product

variable cost behavior

* vary in total directly and proportionately with activity level


* Per unit cost stays the same
* Examples include direct materials and direct labor

Fixed cost behavior

* Per unit cost varies inversely with activity level
* Remain the same in total regardless of activity level
* Examples include property taxes and rent

Mixed cost behavior

* Change in total, but not proportiontely, with activity level
* Examples include a utility bill
* Contain both a fixed and variable component

For cost volume profit analysis, it assumed that costs are linear within the relevant range.

true

GAAP income statement

* Emphasizes gross profit
* Differentiates between product and period costs

CVP Income Statement

* Emphasizes contribution margin
* Differentiates between variable and fixed costs

Break even point

the point where total revenue equals;s total cost

contribution margin

sales revenue minus variable costs

the break even point formula is

fixed cost/ contribution margin

The amount that by which actual or expected sales exceeds breakeven sales is referred to as

margin of safety

sales mix

the relative percentage in which a company sells its multiple products.

What is the key factor if a company has limited resources?

contribution margin per unit of limited resource

Which of the following would most likely NOT use a job order cost system?

cereal manufacturer

Job order cost flow

1. Accumulate raw materials, factory labor and manufacturing overhead costs
2. Assign cosst to Work in Process
3. Transfer costs to Finished Goods
4. Transfer costs to Cost of Goods Sold

\

What is the name of the account that accumulates wages and salaries of manufacturing employees?

factory labor

Job cost sheets make up the subsidiary ledger for which account?

Work in process

When materials are requisitioned (issued to production), the-------- account is debited for direct materials and the ---------account is debited for indirect materials.

WIP, Moh

Actual overhead costs are easily assigned to specific jobs.

False

Many companies use machine hours as an activity base for manufacturing overhead rates due to the increae in automation.

True

When a job is completed, the entry made is:

Debit: Finished Goods Inventory; Credit: Work in Process Inventory

The Cost of Goods Manufactured Schedule uses overhead applied, instead of actual overhead costs.

True

At the end of the year, it is determined that actual overhead costs were greater than applied overhead.  This is called:

underapplied overhead

Financial Accounting

* Condensed reports that follow Generally Accepted Accounting Principles
* Users include stockholders and creditors
* Quarterly and annual reports

Managerial Accounting

* Internal users
* Focus is on relevance to decision making
* Detailed reports prepared as frequently as needed

Directing

Coordinating the company's activities and resources

controlling

Keeping the company on track

\

Planning

Looking towards to the future and establish goals

Manufacturing costs include:

\
direct materials, direct labor and manufacturing overhead

The salary of a factory manager would be classified as:

indirect labor

All manufacturing costs are classified as period costs.

false

Product costs are recorded as an asset (inventory) when incurred.  

True

Period cost

Advertising

MOH

Property taxes on manufacturing facility

Direct Materials

wood

Direct Labor

Wages of carpenters assembling furniture

The three inventory accounts of a manufacturing company are

raw materials, WIP, and finished

Which of the following is the correct formula for Cost of Goods Manufactured?

Beginning Work in Process + Manufacturing Costs - Ending Work in Process

Which of the following is the correct formula for Cost of Goods Sold?

Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods

Which of the following statements is true?

Tax planning is legal; tax evasion is illegal.

Which of the following entities do NOT pay taxes?

Sole proprietorship

Individual income taxes use progressive rates, while corporations pay a flat rate.

true

A $1,000 tax deduction provides more benefit than a $1,000 tax credit.

false

Which of the following is excluded from total earnings?

Gifts and inheritances

Which of the following are adjustment to gross income?

* health savings account contributions
* contributions to retirement plans
* student loan interest

Taxpayers should choose the larger of the standard deduction or itemized deductions.

true

Which of the following is NOT an itemized deduction?

Penalty on early withdrawal of savings

Which of the following is NOT a tax credit?

Medical and dental expense credit

When does a taxpayer receive a refund?

When the taxpayer has paid too much tax during the year

horizontal analysis

Evaluates financial statement data by computing changes from one period to a prior period

Industry averages

Provides information about company's industry position

Intracompany basis

Used to detect changes in financial information and identify trends within a company.

Vertical Analysis

Expresses financial statement data as a percent of a base amount

liquidity ratios

Measure company's ability to meet its short-term obligations

Profitability ratios

\

Measure operating success

Solvency ratios

Measure company's ability to survive long-term

The current ratio:

is used to measure the short-term debit paying ability of a company

The denominator of accounts receivable turnover is:

average net accounts receivable

The debt-to-assets ratio measures:

the percentage of financing provided by creditors

Which of the following industries would be considered a high-volume, with lower profit margins?

Grocery stores

Return on assets can be broken down into which two ratios?

\
Profit margin and asset turnover

If an investor is interested in how much a company pays in dividends, he/she would look at:

the payout ratio

The Cash Flow Statement can help users assess all of the following EXCEPT:

\

if revenues were appropriately matched with expenses during the period.