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Acct 314
Test 2
| Question | Answer |
|---|---|
| A proposed quantitative plan of action by management for a specified period | Budget |
| An aid to coordinating what needs to be done to implement that plan | Budget |
| May include both financial and nonfinancial data | Budget |
| a part, segment, or division/department/subunit of an organization whose manager is accountable for a specified set of activities. | Responsibility Center |
| a system that measures the plans, budgets, actions, and actual results of each responsibility center. | Responsibility accounting |
| RESPONSIBILITY CENTRES - accountable for costs only | Cost |
| RESPONSIBILITY CENTRES - accountable for revenues only | Revenue |
| RESPONSIBILITY CENTRES - accountable for revenues and costs | Profit |
| RESPONSIBILITY CENTRES - accountable for investments, revenues, and costs | Investment |
| used to assist managers in planning and budgeting. | Sensitivity analysis |
| a “what if” technique that illustrates the impact of changes from the predicted data. | Sensitivity analysis |
| the degree of influence that a manager has over costs, revenues, or related items for which he is being held responsible. | Controllability |
| focuses on information sharing, not in laying blame on a particular manager | Responsibility accounting |
| Budgets offer feedback in the form of ________: actual results deviate from budgeted targets. | variances |
| provide managers with Early warning of problems | variances |
| provide managers with A basis for performance evaluation | variances |
| provide managers with A basis for strategy evaluation | variances |
| The budgeting process may be abused both by superiors and subordinates, leading to ______ outcomes | negative |
| Superiors may dominate the budget process or hold subordinates accountable for events they have no ______ over. | control |
| The practice of underestimating budgeted revenues, or overestimating budgeted expenses, in an effort to make the resulting budgeted goals (profits) more easily attainable. | Budgetary Slack |
| (T or F) A budget is the quantitative expression of a proposed plan of action by management for a specified period. | True |
| T of F? Budgeting includes only the financial aspects of the plan and NOT any nonfinancial aspects such as the number of physical units manufactured. | False |
| T of F? Budgets can play both planning and control roles for management. | True |
| T of F? It is best to compare this year's performance with last year's actual performance rather than this year's budget. | False |
| T of F? Research shows that challenging budgets improve employee performance because employees view falling short of budgeted numbers as a failure. | True |
| T or F? If we increase the selling price of our product, we should probably expect an increase in the number of these products sold. | False |
| the difference between the actual result and the corresponding static budget amount | Static-budget variance (Level 0) |
| has the effect of increasing operating income relative to the budget amount. | Favorable variance (F) |
| has the effect of decreasing operating income relative to the budget amount. | Unfavorable variance (U) |
| Targets or standards are established for direct material and direct labor | Standard Costing |
| Actual price and usage amounts are compared to the standard and variances are recorded. | Standard Costing |
| Favorable variances are | credits |
| unfavorable variances are | debits |
| the continuous process of comparing the levels of performance in producing products and services against the best levels of performance in competing companies. | Benchmarking |
| T of F? A favorable variance should be ignored by management | FALSE |
| T of F? Information regarding the causes of variances is provided when the master budget is compared with actual results. | FALSE |
| T of F? The flexible-budget variance may be the result of inaccurate forecasting of units sold. | FALSE |
| T of F? An unfavorable variance is conclusive evidence of poor performance. | FALSE |
| T of F? The direct manufacturing labor price variance is likely to be unfavorable if lower-skilled workers are put on a job. | FALSE |
| T of F? A favorable variance can be automatically interpreted as "good news." | FALSE |
| T of F? A particular variance generally signals one particular problem. | FALSE |
| ______ is the most difficult cost to manage, and is the least understood. | Overhead |
| _______ variances involve taking differences between equations as the analysis moves back and forth between actual results and budgeted amounts | Overhead |
| T of F? The variable overhead flexible-budget variance measures the difference between the actual variable overhead costs and the flexible-budget variable-overhead costs. | TRUE |
| T of F? The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used. | TRUE |
| T of F? An unfavorable variable overhead efficiency variance indicates that the company used more than planned of the cost-allocation base. | TRUE |
| T or F? For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount. | TRUE |
| T of F? The fixed overhead flexible-budget variance is the difference between actual fixed overhead costs and the fixed overhead costs in the flexible budget. | TRUE |
| T of F? One way to manage both variable and fixed overhead costs is to eliminate value-adding activities. | FALSE |
| T of F? The planning of fixed overhead costs does NOT differ from the planning of variable overhead costs. | FALSE |
| T of F? Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected. | FALSE |
| T of F? If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be a favorable variable overhead efficiency variance. | FALSE |
| T or F? Fixed costs may have a spending variance and/or an efficiency variance. | FALSE |
| T of F? Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero. | FALSE |
| T of F? The fixed overhead efficiency variance is the difference between actual fixed overhead costs and fixed overhead costs in the flexible budget. | FALSE |
| T of F? Managers should use unitized fixed manufacturing overhead costs for planning and control. | FALSE |
| T of F? At the end of the fiscal year, the fixed overhead spending variance is always prorated among work-in-process control, finished goods control, and cost of goods sold on the basis of the fixed overhead allocated to these accounts. | FALSE |
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