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ACCT 2110; Test 4
Managerial Accounting; Test 4 (Ch 24-25); Study Guide
| Question | Answer |
|---|---|
| Management by exception means that top management's review of a budget report is focused entirely/primarily on... | differences between actual results & planned objectives. |
| For management by exception to be effective, there must be guidelines for identifying an exception. The usual criteria are (2): | Materiality & Controllability of the item |
| Materiality is expressed as a... | percentage difference from budget |
| Controllability of the item is exception guidelines are... | more restrictive for controllable items than for items that are not controllable by the manager. |
| A static budget is a... | projection of the budget data at a single level of activity. |
| ___ ___ are always compared with the budget data at the activity level used in developing the master budget. | Actual results |
| A static budget is appropriate in... | evaluating a manger's effectiveness in controlling costs. |
| A flexible budget: | projects budget data for various levels of activity. |
| The flexible budget is a series of.... | static budgets at different levels of activity. |
| Flexible budgets recognize that the budgetary process is more useful if it is... | adaptable to changed operating conditions. |
| To develop a flexible budget, management should take the following steps (4): | 1.)Identify the activity index&relevant range. 2.)Identify the variable cost&determine budgeted variable costs per unit. 3.)Identify the fixed cost&determine the budgeted amount for each. 4.)Prepare the budget for selected increments. |
| Flexible budget reports are another type of ___ ___ predicted by managerial accounting. | internal report |
| The flexible budget report consists of two sections: | Production data for a selected activity index & Cost data for variable&fixed costs |
| Responsibility centers are classified into one of these three types: | Costs centers, Profit centers, or Investment centers |
| A cost center incurs costs but... | does not directly generate revenues. |
| The evaluation of a manager's performance for costs centers is based on... | his/her ability to meet budgeted goals for controllable costs. |
| A profit center incurs costs &... | also generates revenues. |
| In a profit center, the ___ ___ & ___ ___ are controllable by the manager of the profit center. | operating revenues & variable expenses |
| A responsibility report for a profit center shows... | budgeted & actual controllable revenues & costs |
| An investment center... | incurs costs (& expenses), generates revenues, & has control over investment funds available for use. |
| An important characteristic of an investment center is that the... | manager can control/significantly influence the investment funds available for use. |
| The formula for Return on Investment (ROI) is: | Controllable Margin / Average Operating Assets = ROI |
| A manager can improve ROI by increasing ____ ___ or reducing ___ ____ ___. | increasing controllable margin, or reducing average operating assets. |
| What is the manufacturing of products? | waste, scrap, evaporation, etc. |
| Normal spoilage is considered.... | unavoidable & is part of the cost producing the good output. |
| Abnormal spoilage is considered... | avoidable & is not part of the cost of producing goods output. |
| Direct fixed costs, or traceable costs, are costs that relate specifically to a... | responsibility center & are incurred for the sole benefit of the center. |
| Indirect fixed costs, or common fixed costs, pertain to a company's overall.... | operating activities, & are incurred for the benefit of more than one profit center. |
| Standard cost is the: | predetermined unit costs which companies use as a measure of performance. |
| Actual costs is basically... | what you actually did |
| A variance is the differences between... | total actual costs and total standard costs. |
| An unfavorable variances suggests that... | too much was paid for materials & labor, or that there were inefficiencies in using materials & labor. |
| A favorable variance indicates the efficiencies in... | incurring costs and in using materials & labor. |
| Standards may be set at one of two levels: | Ideal standards & Normal standards |
| Ideal standards represent ... | optimum levels of performance under perfect operating conditions. |
| Normal standards represent... | efficient levels of performance that are attainable under excepted operating conditions. |
| The ___ ____ ___ ____ is the cost per unit of direct materials that should be incurred. | direct materials price standard |
| The ___ ___ ___ __ is the quantity of direct materials that should be used per unit of finished goods. | direct materials quantity standard |
| The __ ___ ___ ___ is the rate per hour that should be incurred for direct labor. | direct labor price standard |
| The __ ___ ___ ___ is the time that should be required to make one unit of the product. | direct labor quantity standard |
| The ___ ___ __ is based on a standard predetermined overhead rate. | manufacturing overhead standard |
| The balanced scorecard evaluates company performance from a series of perspectives. The four most commonly used perspectives are: | Financial, Customer, Internal process, & Learning&growth |
| The financial perspective is the ___ traditional view of the company. | most |
| The financial perspective evaluates the... | financial measures of performance used by most firms. |
| The customer perspective evaluates... | how well the company is performing from the viewpoint of the customers. |
| The customer perspective measures how well the company compares to competitors in terms of: | price, quality, product innovation, customer service, & other dimensions. |
| The internal process perspective evaluates the... | internal operating process critical to success. |
| The internal process evaluated __ __, ___, ___, & __-__ __ to ensure that the company is operating effectively & efficiently. | product development, production, delivery, & after-sale service |
| The learning & grown perspective evaluates how well the company... | developed & retained its employees. |
| The learning & grown perspective includes an evaluation of such stuff as: | employee skills, employee satisfaction, training programs, & information dissemination. |
| A matrix is sometimes used to determine & analyze a ____, because it shows a convenient structure for determining it. | variance |
| 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
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