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ACCT 2110; Test 4

Managerial Accounting; Test 4 (Ch 24-25); Practice

QuestionAnswer
1.) Budgetary control involves all but one of the following: using static budgets.
2.) Budget reports are prepared: All of the above. (daily; weekly; monthly)
3.) A production manager in a manufacturing company would most likely receive a: scrap report.
4.) A static budget is: a projection of budget data at a single level of activity.
5.) A static budget is useful in controlling costs when cost behavior is: fixed.
6.) 0DL hr in a flexible budget graph, the TBC line intersects the vertical axis @$30,000. @10,000DLH, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90,000. Fixed and variable costs may be expressed as: $30,000 fixed plus $6 per direct labor hour variable. ($90,000 – $30,000) / 10,000
7.) @ 9,000 direct labor hours, the flexible budget for indirect materials is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials: $400 unfavorable. $28,000 – [9,200 x ($27,000 / 9,000)]
8.) Under responsibility accounting, the evaluation of a manager's performance is based on matters that the manager: directly controls.
9.) Responsibility centers include: All of the above. (cost centers; profit centers; investment centers)
10.) Responsibility reports for cost centers: include only controllable costs.
11.) The accounting department of a manufacturing company is an example of: a cost center.
12.) To evaluate the performance of a profit center manager, upper management needs detailed information about: controllable costs and revenues.
13.) In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show: controllable margin.
14.) In the formula for return on investment (ROI), the factors for controllable margin and operating assets are, respectively: controllable margin dollars and average operating assets.
15.) A manager of an investment center can improve ROI by: reducing variable and/or controllable fixed costs.
16.) Which one of the following is not part of the budgetary control process? Managers must use responsibility accounting.
17.) Ace Company monitors its managers’ performance using a static budget. Which one of the following situations will provide the fairest evaluation for those managers? When the company performs at the same activity level as the static budget level.
18.) The first step in developing a flexible budget is to identify the activity index and the relevant range of activity. True
19.) Cost centers are usually either production departments or service departments. True
20.) Responsibility reports for cost centers include only controllable costs.
21.) Boyce Manufacturing Co.'s operates 3 profit centers. What variance will appear on the performance report for controllable margin? $260F.
22.) The primary basis for evaluating the performance of a manager of an investment center is return on investment. True
23.) Return on investment can be improved by increasing controllable margin and/or reducing average operating assets. True
24.) Which of the following does not impact the amount of residual income? Net Income
25.) Sand Company had sales of $400,000, variable costs of $200,000, and direct fixed costs totaling $100,000. The company’s operating assets total $800,000, and its required return is 10%. How much is the residual income? $20,000 [($400,000 - $200,000 - $100,000) - ($800,000 x 10%)]
1.) Standards differ from budgets in that: budgets are a total amount and standards are a unit amount.
2.) Standard costs: are predetermined unit costs which companies use as measures of performance.
3.) The advantages of standard costs include all of the following except: management must use a static budget.
4.) Normal standards: allow for rest periods, machine breakdowns, and setup time.
5.) The setting of standards is: a management decision.
6.) Each of the following formulas is correct except: Materials price variance = (Actual quantity x Actual price) – (Standard quantity x Standard price)
7.) In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is: $300 unfavorable [(6,300 x $1.10) -- (6,000 x $1,00)]
8.) In producing product ZZ, 14,800 direct labor hours were used at a rate of $8,20 per hour. The standard was 15,000 hours at $8.00 per hour. Based on these data, the direct labor: quantity variance is $1,600 favorable
9.) Which of the following is correct about the total overhead variance? Standard hours allowed for the work done is the measure used in computing the variance.
10.) The formula for computing the total overhead variance is: actual overhead less overhead applied.
11.) Which of the following is incorrect about variance reports? They should only be sent to the top level of management.
12.) In using variance reports to evaluate cost control, management normally looks into: both favorable and unfavorable variances that exceed a predetermined quantitative measure such as a percentage or dollar amount.
13.) Generally accepted accounting principles allow a company to: report inventory and cost of goods sold at standard cost as long as there are no significant differences between actual and standard cost.
14.) Which of the following would not be an objective used in the customer perspective of the balanced scorecard approach? Earnings per share.
15.) Which of the following is incorrect about a standard cost accounting system? It reports only favorable variances.
16.) The formula to compute the overhead volume variance is: Fixed overhead rate x (Normal capacity hours – Standard hours allowed)
17.) What is the difference between a budget and a standard? A budget is a total amount, while a standard expresses only a unit amount.
18.) Which one of the following is not an advantage of standard costing? It determines who is responsible for variances.
19.) The standard manufacturing overhead rate per unit is the predetermined overhead rate times the activity index quantity standard. True
20.) Labor quantity variances usually result from misallocation of workers. False
21.) The overhead variance is the responsibility of the production department if the cause is inefficient use of direct labor or machine breakdowns. True
22.) Which of the following is incorrect about variance reports? They should only be sent to the top level of management.
23.) When a company prepares financial statements using standard costing, which items are reported at standard cost? Inventories and cost of goods sold.
24.) Which statement is true concerning the balanced scorecard? It links performance measures to a company’s strategic goals.
25.) In a standard cost accounting system, the entry to record purchase of raw materials on account for $13,500 when the standard cost is $12,750 includes debit to Raw Materials Inventory for 12,750, debit to Materials Price Variance for $750 and credit to Accounts Payable for $13,500.
26.) Santana Company produces tanning lotion. The following information is provided concerning its standard cost system for the year: How much is the overhead controllable variance? $592U.
Ex 24-3; Flexible Budget (fill out) Activity level Direct labor hrs Var. Cost Indirect labor (x) Indirect mater. (x) Util. (x) Tot. var. costs Fix costs Sup. (same) Dep. (same) Prop. Tax (same) Tot. fix costs Tot. costs
Ex 24-16; Responsibility Report (fill out); part a Sales Var. costs COGS (d) S&A (d) Tot. (d) Contribution margin (Sales - Tot.) Control. fix costs COGS (d) S&A (d) Tot. (d) Controllable margin (Contri. mar - Tot.)
How to determine which is Unfavorable or Favorable? # - # = + (Unfavorable) # - # = - (Favorable) 0 = Neutral COGS, S&E, & T for Responsibility Report is different!!
Created by: ibenoit95