EXAM 3 REVIEW

Based on predicted production of 48,000 units, a company budgets $600,000 of fixed costs and $492,000 of variable costs. If the company actually produces 40,000 units, the flexible budget amount of fixed costs is $600,000.
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Based on predicted production of 48,000 units, a company budgets $600,000 of fixed costs and $492,000 of variable costs. If the company actually produces 40,000 units, the flexible budget amount of fixed costs is $600,000.
TRUE
When a standard cost system is used, managers apply overhead costs to products and services using a standard overhead rate.
TRUE
A company provided the following direct materials cost information. Compute the total direct materials variance.
$78,250 Unfavorable because standard is less than actual
Identify the situation below that will result in a favorable variance.
Actual revenue is higher than budgeted revenue.
Which of the following is not necessary for budgets to be effective?
All budgeted amounts must be spent to ensure that budgets aren't reduced for the next period.
A department store has budgeted sales of 13,000 men's coats in September. Management wants to have 7,000 coats in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 5,000 coats. What is the dollar amount of the coat purchases if each coat has a cost of $85?
[(13000+7000)-5000)]*85=$1,275,000
A flexible budget performance report compares:
Actual performance and budgeted performance based on actual activity level.
The master budgeting process begins with the:
Sales budget.
The merchandise purchases budget consists of three parts: (1) budgeted sales units, (2) desired ending inventory units, and (3) cost of merchandise purchases.
TRUE
A cost variance is the difference between actual cost and standard cost.
True
A company's flexible budget for 48,000 units of production showed variable overhead costs of $72,000 and fixed overhead costs of $64,000. The company incurred overhead costs of $122,800 while operating at a volume of 40,000 units. The total controllable cost variance is:$1,200 favorable.A July sales forecast projects that 6,100 units are going to be sold at a price of $10.60 per unit. Management forecasts 15% growth in sales each month. Total July sales are anticipated to be:$64,660.Which of the following is a benefit derived from budgeting?Budgeting provides a basis for evaluating performance.A formal statement of a company's plans in dollars is a:Budget.Continuous budgeting is the practice of revising budgets as time passes.TRUEWhich department is often responsible for the price paid for direct materials?The purchasing department.The difference between actual price per unit of input and the standard price per unit of input results in a:Price variance.Budgets can be used to motivate employees because budgeted performance levels can provide goals for employees to attain or exceed.TRUEA department that incurs costs without generating revenues is a:Cost centerA cost center is a unit of a business that incurs costs without directly generating revenues. All of the following are considered cost centers except:Juice product line division at Coca Cola.The type of department that generates revenues, incurs costs, and whose manager is responsible for major investing decisions is called a(n):Investment centerA company is considering three alternative investment projects. Accounting rate of return computations are calculated using Excel and are shown below. If the company can choose only one project, which will it choose on the basis of accounting rate of return?Project C highest rate of returnA responsibility accounting performance report displays:Both actual costs and budgeted costs.An expense that is readily traced to a department because it is incurred for that department's sole benefit is a(n):Direct expense.An accounting system that recognizes that control over costs is different for different levels of management is called a(n):Responsibility accounting system.Costs that a manager can determine or influence are:Controllable costs.Indirect expenses and service department expenses are allocated to departments that benefit from them.TRUEA company has two departments, Y and Z that incur advertising expenses of $9,400. Advertising expenses are allocated based on sales. Department Y has sales of $456,000 and Department Z has sales of $684,000. The advertising expense allocated to Departments Y and Z, respectively, are:Two investments with the exact same payback period are not always equally valuable to an investor because the timing of net cash flows may be different.TRUEProfit center managers are evaluated on their success in generating income.TRUEA cost incurred to produce or purchase two or more products at the same time is a(n):JOINT COSTDirect expenses require allocation across departments because they cannot be readily traced to one department.FALSE