Midterm 3

Question 1

Which of the following covers all of the resources needed to execute the organization’s operations, including sales, production, purchasing, and marketing?

Answer 1

Operating Budget

Question 2

Which of the following is not a source of information that must be considered when creating the sales forecast?

Answer 2

Quarterly expected taxes due

Question 3

A company’s master budget projected sales of 20,000 units for a total of $330,000 in revenue. It expects to have manufacturing costs of $230,000, of which $170,000 is fixed. Other operating costs are projected to be $76,000, all of which are fixed. If the company actually sold 17,000 units, the operating income when using a flexible budget will be

Answer 3

(16,500)

Question 4

A top-down approach to budgeting in which top management makes all budgeting decisions is a(n)

Answer 4

Authoritative Budget

Question 5

What are activities that prevent the release of, reduce, or remove carbon emissions from the atmosphere?

Answer 5

Carbon Offsets

Question 6

Budget consisting of all of the expenses that will be required to achieve planned production.

Answer 6

Operating Costs Budget

Question 7

Identifies expected sales in units and dollars.

Answer 7

Sales Budget

Question 8

Covers all the resources needed to execute the organization’s operations, including sales, production, purchasing, and marketing.

Answer 8

Operating Budget

Question 9

Calculates the total units that must be produced during the budget period to allow the company to meet the expected sales requirements.

Answer 9

Production Budget

Question 10

Uses the planned production amounts to determine the total number of direct labor hours required to achieve production goals.

Answer 10

Direct Manufacturing Labor Cost Budget

Question 11

Contains all of the direct or indirect costs associated with producing the units that have been sold during the budget period.

Answer 11

Cost of Goods Sold Budget

Question 12

Contains each direct material item and its cost

Answer 12

Direct Materials Cost Budget

Question 13

Contains a summary of all the manufacturing costs other than the direct materials and direct labor costs.

Answer 13

Direct Manufacturing Overhead Cost Budget

Question 14

Describes the source and use of funds for planned capital expenditures.

Answer 14

Financial Budget

Question 15

Establishes management’s financial and operational plans for the budget period.

Answer 15

Master Budget

Question 16

What are the costs associated with the standard amounts of materials, labor, and fixed and variable overhead required to produce goods and services?

Answer 16

Standard Costs

Question 17

Standard costs are used for

Answer 17

planning, controlling, and evaluating performance

Question 18

How do most organizations approach the establishment of standard costs?

Answer 18

When organizations determine their standards, they are essentially establishing their goals for production.

Question 19

What is a form of output control that is used to examine and explain why actual results differ from expected performance, which is based on management-determined standards?

Answer 19

Variance Analysis

Question 20

Which of the following is true regarding variance analysis?

Answer 20

It is key to helping organizations understand what caused unexpected changes in operating income, whether those factors are controllable, and who should be held accountable.

Question 21

A company has standard costs for raw materials of $2,700 per ton based on a standard quantity of 11,000 tons. The company ran into an issue with suppliers and had to use a new supplier. This supplier only has 10,000 tons available, but will still offer these tons at the price of $1,000 per ton. The company decided to use what they could get and, during production, they discovered that the new supplier had better quality materials than they were accustomed to using. As a result, the company ended up only needing to use 10,000 tons of materials versus the 11,000 tons they expected to use. What is the direct materials efficiency variance for this company?

Answer 21

$2,700,000 Favorable

Question 22

A company has a journal entry with a debit to direct materials efficiency variance, a debit to work-in-process, and a credit to direct materials. What is a possible explanation for this journal entry?

Answer 22

The company used more raw materials than expected.

Question 23

Which of the following would be a fixed overhead cost for a hair salon?

Answer 23

Monthly rent for the salon

Question 24

The company you work for has a $1,200 unfavorable flexible budget variance and a $6,300 favorable spending variance. What is its efficiency variance for your company?

Answer 24

$7,500 Unfavorable

Question 25

Which of the following describes how efficiently the organization uses its allocation base?

Answer 25

Variable overhead efficiency variance

Question 26

A company has an unfavorable efficiency variance and is trying to understand why this is the case. Which of the following is not a possible explanation for this variance?

Answer 26

Efficient labor

Question 27

A plant manager suggests that they can improve the current variances by purchasing inferior indirect raw materials at a lower price. What is true regarding this suggestion?

Answer 27

This decision might help reduce variances in the short run, but it can have long- term negative implications, such as a lower-quality product that consumers are unwilling to purchase.

Question 28

A company has performed variable overhead variance analysis and has the following information:
* Actual overhead costs of $224,000
* Flexible overhead budget costs of $196,000
* Overhead spending variance costs of $33,000 Favorable
* Overhead efficiency variance costs of $66,000 Unfavorable
* Overhead flexible-budget variance of $56,000 Unfavorable
How should the company record the allocated variable overhead costs, which is based on standards, in its journal entries?

Answer 28

Work-in-Process: Debit $196,000; Variable Overhead Allocated: Credit $196,000

Question 29

You are an accounting manager at a company that produces bouncy balls. Before the start of the year, you estimated fixed overhead to be $480,000 for the year. At the end of the year, you find that actual fixed overhead was $470,000. The company uses machine hours as a cost-allocation base and estimates that each bouncy ball takes 0.60 hours of machine time. The annual planned production was 1,000,000 balls and the actual production was 940,000 balls. What amount do you share with the management team for the fixed overhead spending variance?

Answer 29

$28,800 Unfavorable