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43 terms

Accounting Test 3

STUDY
PLAY
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