The difference between actual sales volume and budgeted sales volume has nothing to
do with the price and quantity variance.
Managerial accounting differs from financial accounting in that managerial accounting
has no comparable set of rules governing what information must be provided to
decision makers or how that information is presented.
If a company’s workforce consists of a number of new hires, then their lack of training
could lead to an unfavorable direct labor efficiency variance.
The statement of cash flows is organized into three sections: operating activities,
investing activities, and financing activities.
A zero balance in the manufacturing overhead account indicates that actual overhead
and applied overhead cost are equal, so that all inventory is reflected at actual cost.
When an outsourcing decision refers to the components of a manufactured product, it is
more commonly called an insource or outsource decision.
For processes that are not identical, companies cannot benefit from benchmarking
outside their industry.
The goal of benchmarking is to identify those best practices that improve both quality
and productivity.
When a customer requests a special order and the supplier has capacity constraints,
reducing the special order is not normally an option.
Since a flexible budget is based on actual sales volume, it cannot be prepared until after
the end of the period.
Ethical behavior is knowing right from wrong and conducting yourself accordingly, so
that your decisions are consistent with your own value system and the values of those
affected by your decisions.
Turbo Company’s accounts receivable account balance was $100,000 at the beginning
of the year and $120,000 at the end of the year. Turbo’s percentage change calculation at
the end of the current year is
a. 16.7% decrease.
b. 16.7% increase.
c. 20% decrease.
d. 20% increase.
The three components of product cost include:
a. Direct material, indirect material, and labor.
b. Material, direct labor, and indirect labor.
c. Direct material, direct labor, and overhead.
d. Indirect material, indirect labor, and overhead.
Which of the following is not a measure of liquidity?
a. Working capital
b. Average collection period
c. Acid-test
d. Price-earnings ratio
Which of the following is not a step in preparing the production budget?
a. Add beginning inventory units to required units to determine the budgeted
production.
b. Enter budgeted sales units from the sales budget.
c. Calculate budgeted ending inventory units for the period.
d. All of these answer choices are steps in preparing the production budget.
Which of the following is a reason capital budget requests should be reviewed and
approved by executive management?
a. These investments are made for the long-term
b. These investments will likely have a significant impact on the company’s future
financial health
c. Both because these investments are made for the long-term and because these
investments will likely have a significant impact on the company’s future financial
health
d. Neither because these investments are made for the long-term nor because these
investments will likely have a significant impact on the company’s future financial
health
An application base should be an activity that
a. Causes overhead to be incurred.
b. Is highly correlated with overhead.
c. Both causes overhead to be incurred and is highly correlated with overhead.
d. Neither causes overhead to be incurred nor is highly correlated with overhead.
The statement of cash flows does not include cash inflows and outflows for which of
the following activities?
a. Financing activities
b. Investing activities
c. Operating activities
d. Revenue activities
Long-term planning is often referred to as
a.Strategic planning.
b.Operational planning.
c.Goal-oriented planning.
d.External planning.
Dun and Bradstreet’s Industry Norms and Key Business Ratios and the Almanac of
Business and Industrial Financial Ratios are two publications relevant to managers
interested in understanding a company’s performance relative to its competitors.
Required: a. What is the meaning of SIC and NAICS? b. Explain how the SIC and
NAICS codes were developed.
Finished Goods Inventory increases by the
a. Cost of goods manufactured.
b. Overhead applied.
c. Cost of selling the product.
d. Cost of goods sold.
Which of the following does not describe the learning and growth perspective?
a. Hiring the right people
b. Training employees effectively
c. Giving employees the technologies they need to develop and produce the products
and services that customers desire.
d. Choosing customers the company wants to serve
Carla’s Citrus packs and ships high-quality oranges, grapefruit, and other fruit to
retailers in the U.S. Carla has been experiencing an increase in demand for its products
and is considering the purchase of a new packaging machine to replace the machine
currently in use. The new machine will cost $202,500, and installation will require an
additional $4,050. The machine has a useful life of 10 years and is expected to have a
salvage value of $5,400 at the end of its useful life. The variable cost to operate the new
machine is $13.50 per carton compared to the current machine’s variable cost of $13.65
per carton. Carla expects to pack 250,000 cartons each year. If the new machine is
purchased, Carla will avoid a required $13,500 overhaul of the current machine in three
years. The current machine has a market value of $16,200.
Required
a. Calculate the net present value of the new packaging machine. Assume that Carla
uses a 10% discount rate.
b. Do you recommend that Carla purchase the new machine? Why or why not?
c. Assume that Carla has adopted a new 15% discount rate. Do you recommend that
Carla purchase the new machine? Why or why not?
Curtis Unique Toys has an on-line business where he sells a variety of hand-made toys.
Curtis purchases the items from local wood workers and artisans and ships them all
over the world. Identify each of the following costs incurred by Curtis in terms of its
cost behavior – variable, fixed, mixed, or step.
a.Replacement wheels for toy wagons
b.Wages for sales clerks who are paid for the number of orders they ship
c.Webmaster fee which bills Curtis a base fee plus a small charge for every update
made
d.Shipping charges for bulk shipments (billed in 100 pound increments)
e.Telephone charges (base rate plus usage)
f.Rental for warehouse space
g.Salary for Curtis (president of company)
h.Sales bonuses to on-line order clerks of $1 for each clearance item sold
i.Straight line depreciation on store fixtures
j.Boxes for shipping toys
A characteristic of a variable cost is
a.The total cost varies in proportion to changes in the level of activity.
b.The cost per unit remains constant, regardless of the level of activity.
c.Both that the total cost varies in proportion to changes in the level of activity and that
the cost per unit remains constant, regardless of the level of activity.
d.Neither that the total cost varies in proportion to changes in the level of activity nor
that the cost per unit remains constant, regardless of the level of activity.
If activity level increases, what happens to the total fixed cost?
a.It decreases.
b.It increases.
c.It remains the same.
d.It depends on how much the activity level increases.
Indicators that an activity-based costing analysis may be appropriate include all the
following except
a. Some manufacturing departments run at capacity, while others have minimal
operations.
b. Bids for jobs that require ‘special” processing are always accepted.
c. Products are similar and consume resources in the same way.
d. High-volume jobs show losses or minimal profits, while low-volume jobs show
healthy profits.
Answer the following questions related to the investing and financing sections of the
statement of cash flows.
a. In which balance sheet accounts are investing activities recorded?
b. In which balance sheet accounts are financing activities recorded?
c. When a gain or loss is recorded on the sale of an asset, what amount is shown in the
investing section of the statement of cash flows?
Georgia Manufacturing Company has provided the following information for
calculating cost pool rates for selling activities:
Required:
Calculate the activity cost pool rate for each selling activity.
Describe the budget development process and explain how it fits into management ‘s
planning process.
What managerial behavior does variable costing render ineffective?Using variable
costing prevents managers from making their income higher by producing more units
than are sold, thus moving some fixed cost from the income statement to the balance
sheet for the period.
Danny ‘s Delights is a wholesale bakery. Danny makes a variety of baked goods which
he sells to restaurants and grocery stores. His best-selling item is a peanut butter cookie.
The recipe calls for 1 cup of peanut butter, 1 cup of sugar and 1 egg. Each recipe makes
a batch of one dozen cookies. Danny ‘s standard direct materials cost for batch of
cookies is $0.90 for peanut butter, $0.15 for sugar and $0.10 for an egg. In addition, the
cookies are packaged by the dozen in cardboard containers costing $0.25 each. One
batch of cookies requires 4 minutes preparation time, 8 minutes of cooking time, and 3
minutes of packaging time. The standard wage rate is $8 per hour. Overhead is applied
at 50% of direct labor cost.
Required:
Calculate the standard cost for a batch (1 dozen) of peanut butter cookies.
You have recently accepted a position as a manager with Athletic Academy. At a recent
managers meeting, the controller asked for input on how to make the budgeting process
more effective. Specifically, the controller indicated that the employees did not seem to
be committed to the budget during the previous period. Unfortunately, none of the
managers reached their targeted sales projections for the previous period.
Required:
Explain to the other managers what method the company apparently used in the
previous period and why the method created the lack of commitment. Also discuss
flaws the alternative approach to budgeting.