A favorable direct materials cost variance occurs when the actual direct materials cost
incurred is greater than the standard direct materials cost.
Fixed cost per unit is assumed to be constant within a particular relevant range of
activity.
Budgets provide a benchmark that motivates employees and helps managers evaluate
performance.
In a process costing system, equivalent units must be calculated separately for materials
and conversion costs.
A unique factor of responsibility accounting performance reports is the focus on
responsibility and controllability.
When evaluating variances, exceptions can be expressed as a percentage of a budgeted
amount or a dollar amount.
When direct materials are received on the production floor, they are recorded on the job
cost record.
Favorable and unfavorable variances are subtracted from each other to arrive at a net
favorable or unfavorable variance.
A strategic budget is a long-term financial plan used to coordinate the activities needed
to achieve the long-term goals of the company.
When favorable variances are added to unfavorable variances, the result is always a
total favorable variance.
Because it is a volume variance, the fixed overhead volume variance explains why
fixed overhead is underallocated or overallocated.
Grantham Company sells two products, X and Y. For the coming year, Grantham
predicts sales of 5,000 units of X and 10,000 units of Y. The contribution margins of the
two products are $5 and $4, respectively. The weighted-average contribution margin is
$6.50.
The discounted cash flow methods of evaluating capital investments are superior
because they consider both the time value of money and the profitability of the
investment.
The fixed overhead volume variance is a cost variance that explains why fixed overhead
is overallocated or underallocated.
The income statement for Nighty Night, Inc. is divided into two product lines, blankets
and pillows, as follows:
Nighty Night, Inc. should eliminate the pillows product line only, if by doing so, they
can eliminate more than $70,000 of fixed costs.
Kyanite Corporation, a manufacturer, reports costs for the year as follows:
How much is the total period costs for Kyanite?
A) $735,000
B) $510,000
C) $26,000
D) $700,000
Venus Manufacturing uses a predetermined overhead allocation rate based on a
percentage of direct labor cost. At the beginning of the year, it estimated the
manufacturing overhead rate to be 20% of the direct labor cost. In the month of June,
Venus completed Job 13C and its details are as follows:
What is the total cost incurred for Job 13C?
A) $27,632
B) $24,000
C) $10,360
D) $30,360
Allen Company manufactures staplers. The budgeted sales price is $14.00 per stapler,
the variable costs are $3.00 per stapler, and budgeted fixed costs are $10,000. What is
the budgeted operating income for 4,300 staplers?
A) $47,300
B) $37,300
C) $60,200
D) $12,900
The cash budget and the budgeted financial statements are collectively known as the
________.
A) operating budget
B) master budget
C) financial budget
D) production budget
Both job order costing and process costing ________.
A) maintain a single Work-in-Process Inventory account
B) treat all period costs as product costs
C) follow last-in, first-out method for inventory valuation
D) have the same type of product costs
Watson, Inc. has collected the following data for the current year:
The beginning Finished Goods Inventory costs were $3,800 under absorption costing
and $2,000 under variable costing.
What is the operating income using absorption costing? (Round any intermediate
calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $56,619
B) $38,849
C) $52,349
D) $3,800
Colin was a professional classical guitarist until a motorcycle accident left him
disabled. After long months of therapy, he hired an experienced luthier and started a
small shop to make and sell Spanish guitars. The guitars sell for $900, and the fixed
monthly operating costs are as follows:
Colin’s accountant told him about contribution margin ratios, and Colin understood
clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything
above that point was profit.
What is the amount of revenue Colin should earn each month to break even? (Round
your answer to the nearest dollar.)
A) $7,938
B) $5,292
C) $4,500
D) $4,125
One of the assumptions of cost-volume-profit (CVP) analysis is that there are no
changes in the ________.
A) accounts payable
B) cash balance
C) inventory levels
D) account receivables
A high rate of employee turnover indicates that ________.
A) employees of the organization leave their jobs frequently
B) pay packages of employees are at par with that of the industry
C) the employee retention ratio is also high
D) employees also participate in the decision making process
Huston Company, a manufacturer of office supplies, provides the following financial
information:
Calculate the return on investment for the Pen Division. (Round your answer to two
decimal places.)
A) 16.81%
B) 12.31%
C) 17.24%
D) 16.39%
At the end of the year, Beta, Inc. has an unadjusted debit balance in the Manufacturing
Overhead account of $4,000. The adjusting journal entry needed to adjust the balance to
zero will include a ________.
A) debit to Cost of Goods Sold $4,000 and credit to Manufacturing Overhead $4,000
B) debit to Manufacturing Overhead $4,000 and credit to Cost of Goods Sold $4,000
C) debit to Work-in-Process Inventory $4,000 and credit to Manufacturing Overhead
$4,000
D) debit to Gross Profit $4,000 and credit to Cost of Goods Sold $4,000
What does the variable overhead efficiency variance measure?
Use the following purchases journal to record the preceding transactions.
The following is divisional information for Falcon Enterprises:
The target rate of return is 12% for the East Division and is 10% for the West Division.
Compute residual income for each division.
Fill in the blanks:
Direct materials cost and direct labor cost can be ________ ________ to products.
Manufacturing overhead costs are ________ in cost pools and then ________ to
products.
Fun Time Amusement Park provides a variety of attractions. Fun Time sells tickets at
$50 per person as a one-day entrance fee. Variable costs are $28 per person, and fixed
costs are $178,800 per month.
Assume that Fun Time reduces fixed costs from $178,800 per month to $166,500 per
month. Compute the new breakeven point in tickets and in sales dollars.
List the budgets that are affected by the budgeted number of units to be produced.
Define market-based transfer price. When should market-based transfer pricing be
used? Explain your answer.
Define cost-based transfer price. When should cost-based transfer pricing be used?
Explain your answer.
What are the strengths of the net present value capital budgeting method?