Accounting Test 3

43 terms by gretchen3 

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Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory

False

For a period during which the quantity of inventory at the end was smaller than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

True

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

Variable costing

Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?

only absorption costing

In the long run, for a business to remain in operation, the selling price of a product should normally cover all costs and expenses and provide a reasonable income.

True

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

True

In variable costing, the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.

True

The factory superintendent's salary would be included as part of the cost of products manufactured under the variable costing concept

False

Sales mix is generally defined as the relative distribution of sales among the various products sold.

True

Under variable costing, which of the following costs would not be included in the finished goods inventory?

- fixed factory overhead cost would not be included,
- direct labor cost, direct materials cost, and variable factory overhead cost would be included

On the variable costing income statement, variable selling and administrative expenses are deducted from manufacturing margin to yield contribution margin.

True

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?

Absorption costing

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

False

Under absorption costing, which of the following costs would NOT be included in finished goods inventor?

- Variable and fixed selling and administrative expenses would not be included
- Direct labor cost, direct materials cost, and variable and fixed factory overhead cost would be included

The absorption costing income statement does NOT distinguish between variable and fixed costs.

True

Employees view budgeting more positively when goals are established for them by senior management

False

Which of the following budgets allow for adjustments in activity levels?

Flexible Budget

The budget process involves doing all of the following except?

dismissing all managers who fail to achieve operational goals specified in the budget

The cash budget is affected by the sales budget, the various budgets for manufacturing costs and operating expenses, and the capital expenditures budget.

True

The objectives of budgeting are:
1) establishing specific goals for future operations
2) executing plans to achieve the goals,
3) periodically comparing actual results with these goals.

True

Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.

False

The first budget to be prepared is usually the sales budget.

True

Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem?

Allowing employees the opportunity to be a part of the budget process.

THe financial budgets of a business include the cash budget, the budgeted income statement, and the budgeted balance sheet.

True

The primary difference between a fixed budget and a flexible budget is that a fixed budget...

is a plan for a single level of production, whereas a flexible budget can be converted to ay level of production.

Budgets are prepared in the Accounting department and monitored by various department managers.

False

Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action.

False

The budget procedures used by a large manufacturer of automobiles would probably not differ from those used by a small manufacturer of paper products.

False

The budgeted volume of production is based on the sum of
1) the expected sales volume and
2) the desired ending inventory, less
3) the estimated beginning inventory

True

The principle of exceptions allows managers to...

Focus on correcting variances between standard costs and actual costs.

Standard costs can be used with both the process cost and job order costs systems.

True

Periodic comparisons between planned objectives and actual performance are reported in...

Budget performance reports.

Standards that represent levels of operation that can be attained with reasonable effort are called:

normal standards

The total manufacturing cost variance consists of:

direct materials cost variance, direct labor cost variance, factory overhead cost variance

If employees are given bonuses for exceeding normal standards, the standards may be very effective in motivating employees

True

Standards are designed to evaluate price and quantity variances separately.

True

The standard cost is how much a product should cost to manufacture.

True

One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs.

True

Standard costs should always be revised when they differ from actual costs.

False

Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area.

False

The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the standard.

False

Volume variance measure fixed factory overhead.

True

Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and not materials spoilage.

True

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