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Study Resources (Accounting)

MATCHING 207.Match the items below by entering the appropriate code letter in the space provided. A.Budgetary control              G.              Responsibility reporting system B.Static budget              H.              Return on Investment C.Flexible budget              I.              Profit center D.Responsibility accounting              J.              Investment center E.Controllable costs              K.              Indirect fixed costs F.Management by exception              L.              Direct fixed costs ____              1.The review of budget reports by top.
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109.An unfavorable labor quantity variance may be caused by a.paying workers higher wages than expected. b.misallocation of workers. c.worker fatigue or carelessness. d.higher pay rates mandated by union contracts. 110.The investigation of materials price variance usually begins in the a.first production department. b.purchasing department. c.controller's office. d.accounts payable department. 111.The investigation of a materials quantity variance usually begins in the a.production.
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Ex. 182 Campbell Clothing produces men’s ties. The following budgeted and actual amounts are for 2016: CostBudget at 5,000 UnitsActual Amounts at 5,800 Units Direct materials$60,000$71,000 Direct labor75,00086,500 Equipment depreciation5,0005,000 Indirect labor7,5008,600 Indirect materials9,0009,600 Rent and insurance12,00013,000 Instructions Prepare a performance budget report for Campbell Clothing for the year. .
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49.Using standard costs a.can make management planning more difficult. b.promotes greater economy. c.does not help in setting prices. d.weakens management control. 50.If standard costs are incorporated into the accounting system, a.it may simplify the costing of inventories and reduce clerical costs. b.it can eliminate the need for the budgeting process. c.the accounting system will produce information which is.
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Ex. 178 Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are: Sales commissions5% Advertising4% Traveling7% Delivery1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February,.
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108.Of the following choices, which contain both a traceable fixed cost and a common fixed cost? a.Profit center manager’s salary and timekeeping costs for a responsibility center’s employees. b.Company president’s salary and company personnel department costs. c.Company personnel department costs and timekeeping costs for a responsibility center’s employees. d.Depreciation on a responsibility center’s equipment.
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Ex. 192 The Atlantic Division of Stark Productions Company reported the following results for 2016: Sales$4,000,000 Variable costs3,200,000 Controllable fixed costs300,000 Average operating assets2,500,000 Management is considering the following independent alternative courses of action in 2017 in order to maximize the return on investment for the division. 1.Reduce controllable fixed costs by 10% with no change in.
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MULTIPLE CHOICE QUESTIONS 39.What is a standard cost? a.The total number of units times the budgeted amount expected b.Any amount that appears on a budget c.The total amount that appears on the budget for product costs d.The amount management thinks should be incurred to produce a good or service 40.A standard cost is a.a cost which is.
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Ex. 184 Strickland Corp.’s manufacturing overhead budget for the first quarter of 2016 contained the following data: Variable Costs Indirect materials$40,000 Indirect labor24,000 Utilities20,000 Maintenance12,000 Ex. 184(Cont.) Fixed Costs Supervisor’s salary$80,000 Depreciation16,000 Property taxes8,000 Actual variable costs for the first quarter were: Indirect materials$37,200 Indirect labor26,400 Utilities21,000 Maintenance10,600 Actual fixed costs were as expected except for property taxes which were $9,000. All costs are considered controllable by.
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Ex. 172 Cody Co. developed its annual manufacturing overhead budget for its master budget for 2016 as follows: Expected annual operating capacity120,000 Direct Labor Hours Variable overhead costs Indirect labor$600,000 Indirect materials120,000 Factory supplies    60,000 Total variable  780,000 Fixed overhead costs Depreciation240,000 Supervision120,000 Property taxes    96,000 Total fixed  456,000 Total costs$1,236,000 The relevant range for monthly activity is expected to be between 8,000 and.
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98.Management by exception a.is most effective at top levels of management. b.can be implemented at each level of responsibility within an organization. c.can only be applied when comparing actual results with the master budget. d.is the opposite of goal congruence. 99.Which responsibility centers generate both revenues and costs? a.Investment and profit centers b.Profit and cost centers c.Cost and.
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Ex. 193 Data for the following subsidiaries of Olive Manufacturing, which are operated as investment centers, are as follows: Fleming CompanyOak Company Sales$3,000,000$2,000,000 Controllable margin(1)(3) Average operating assets(2)4,000,000 Contribution margin1,200,000800,000 Controllable fixed costs500,000200,000 Return on Investment10%(4) Instructions Compute the missing amounts using the ROI formula. Ex. 194 The data for an investment center is given below.     1/1/17   12/31/17 Current assets$   300,000$   700,000 Plant assets3,000,0004,000,000 Idle.
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Ex. 175 Telemark Production’s manufacturing costs for July when production was 2,000 units appears below: Direct materials$10 per unit Factory depreciation$16,000 Variable overhead10,000 Direct labor4,000 Factory supervisory salaries11,600 Other fixed factory costs3,000 Instructions How much is the flexible budget manufacturing cost amount for a month when 2,200 units are produced? .
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119.A company purchases 12,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials? a.$1.00 b.$.50 c.$2.00 d.$6.00 120.A company uses 40,000 gallons of materials for which they paid $7.00 a gallon. The materials price variance was $80,000 favorable.  What is.
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138.Return on investment is calculated by dividing a.contribution margin by sales. b.controllable margin by sales. c.contribution margin by average operating assets. d.controllable margin by average operating assets. 139.Which one of the following will not increase return on investment? a.Variable costs are increased b.An increase in sales c.Average operating assets are decreased d.Variable costs are decreased 140.If an investment center has.
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128.An investment center generated a contribution margin of $400,000, fixed costs of $200,000 and sales of $2,000,000. The center’s average operating assets were $800,000. How much is the return on investment? a.25% b.175% c.50% d.75% 129. Rhein Manufacturing recorded operating data for its auto accessories division for the year. a.45.0% b.22.5% c.15.0% d.12.0% 130.The current controllable margin for Henry.
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Ex. 174 Berne, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor$5.00 Indirect materials2.50 Maintenance.80 Utilities.30 Fixed overhead costs per month are: Supervision$800 Insurance200 Property taxes300 Depreciation900 The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. Instructions Prepare a.
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Ex. 179 A flexible budget graph for the Assembly Department shows the following: 1.At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $120,000. 2.At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $360,000. Instructions Develop the.
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99.A company uses 8,400 pounds of materials and exceeds the standard by 300 pounds. The quantity variance is $1,800 unfavorable. What is the standard price? a.$2 b.$4 c.$6 d.Cannot be determined from the data provided. 100.A company purchases 20,000 pounds of materials. The materials price variance is $4,000 favorable. What is the difference between the.
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Ex. 183 Data concerning manufacturing overhead for Wilson Industries are presented below. The Mixing Department is a cost center. An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and that 50% of supervisory costs are controllable at the department level. Ex. 183(Cont.) The.
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11.Once set, normal standards should not be changed during the year. 12.In developing a standard cost for direct materials, a price factor and a quantity factor must be considered. 13.A direct labor price standard is frequently called the direct labor efficiency standard. 14.The standard predetermined overhead rate must be based on direct labor.
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TRUE-FALSE STATEMENTS 1.Inventories cannot be valued at standard cost in financial statements. 2.Standard cost is the industry average cost for a particular item. 3.A standard is a unit amount, whereas a budget is a total amount. 4.Standard costs may be incorporated into the accounts in the general ledger. 5.An advantage of standard costs is that.
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89.The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance is a.$2,400 unfavorable. b.$2,400 favorable. c.$3,000 unfavorable. d.$3,000 favorable. 90.The standard number of hours that should have been worked for the output attained is.
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21.The overhead controllable variance relates primarily to fixed overhead costs. 22.The overhead volume variance relates only to fixed overhead costs. 23.If production exceeds normal capacity, the overhead volume variance will be favorable. 24.There could be instances where the production department is responsible for a direct materials price variance. 25.The starting point for determining the.
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148.Which of the following would not be considered an aspect of budgetary control? a.It assists in the determination of differences between actual and planned results. b.It provides feedback value needed by management to see whether actual operations are on course. c.It assists management in controlling operations. d.It provides a guarantee for favorable results. 149.A static.
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Ex. 190 Perez Corp. reported the following: Beginning of year operating assets$3,200,000 End of year operating assets3,000,000 Contribution margin1,000,000 Sales5,000,000 Controllable fixed costs643,000 Its required return is 10%. Instructions Compute the company’s ROI. Ex. 191 Lombard, Inc. has two investment centers and has developed the following information: Department ADepartment B Departmental controllable margin$120,000? Average operating assets?$400,000 Sales800,000250,000 ROI10%12% Ex. 191(Cont.) Instructions Answer the following questions about Department A and.
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149.In Zero Company?s income statement, they report actual gross profit of $52,500 and the following variances: a.$46,660. b.$47,500. c.$50,000. d.$53,340. 150.The balanced scorecard a.incorporates financial and nonfinancial measures in an integrated system. b.is based solely on financial measures. c.is based solely on nonfinancial measures. d.does not use financial or nonfinancial measures. 151.Which is not one of the four most commonly.
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59.The two levels that standards may be set at are a.normal and fully efficient. b.normal and ideal. c.ideal and less efficient. d.fully efficient and fully effective. 60.The most rigorous of all standards is the a.normal standard. b.realistic standard. c.ideal standard. d.conceivable standard. 61.Most companies that use standards set them at a.the normal level. b.a conceivable level. c.the ideal level. d.last year's level. 62.A managerial accountant 1.does.
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118.A responsibility report for a profit center will a.not show controllable fixed costs. b.not show indirect fixed costs. c.show noncontrollable fixed costs. d.not show cumulative year-to-date results. 119.The dollar amount of the controllable margin a.is usually higher than the contribution margin. b.is usually lower than the contribution margin. c.is always equal to the contribution margin. d.cannot be a negative.
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68.Management by exception a.causes managers to be buried under voluminous paperwork. b.means that all differences will be investigated. c.means that only unfavorable differences will be investigated. d.means that material differences will be investigated. 69.Under management by exception, which differences between planned and actual results should be investigated? a.Material and noncontrollable b.Controllable and noncontrollable c.Material and controllable d.All differences should.
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S-A E  211 What is responsibility accounting? Explain the purpose of responsibility accounting. S-A E  212(Ethics) Dixon Corporation evaluates its managers based on return on investment (ROI). Kathryn Bricker and Lindsey Allan, managers of the electronics and housewares departments respectively, have recently suffered from declining profits in their departments. Over lunch, they discuss.
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BE 164 Point, Inc. produces men’s shirts. The following budgeted and actual amounts are for 2016: CostBudget at 2,500 unitsActual Amounts at 2,800 units Direct materials$65,000 $75,000 Direct labor  70,000  78,000 Fixed overhead  35,00034,500 Instructions Prepare a performance report for Point, Inc. for the year. BE 165 Moss Corp. reported the following items for 2016: Controllable fixed costs$ .
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Ex. 171 Beal Manufacturing Co.’s static budget at 12,000 units of production includes $72,000 for direct labor and $12,000 for direct materials. Total fixed costs are $48,000. Instructions a.Determine how much would appear on Beal’s flexible budget for 2016 if 18,000 units are produced and sold. b.How would this comparison differ if a static.
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88.At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials: a.$1,400 unfavorable. b.$1,400 favorable. c.$600 favorable. d.$600 unfavorable. 89.The accumulation of accounting data on the basis of the individual manager who.
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BRIEF EXERCISES BE 160 Devlin Manufacturing makes a single product. Expected manufacturing costs are as follows: Variable costs Direct materials$6.50 per unit Direct labor2.40 per unit Manufacturing overhead1.10 per unit Fixed costs per month Supervisory salaries$13,600 Depreciation5,500 Other fixed costs2,200 Instructions Determine the amount of manufacturing costs for a flexible budget level of 3,200 units per month. BE 161 Wind Productions uses flexible budgets..
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69.The total standard cost to produce one unit of product is shown a.at the bottom of the income statement. b.at the bottom of the balance sheet. c.on the standard cost card. d.in the Work in Process Inventory account. 70.An unfavorable materials quantity variance would occur if a.more materials were purchased than were used. b.actual pounds of materials.
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a159.If a company incurs direct labor cost of $82,000 when the standard cost is $84,000, it will a.debit Labor Price Variance for $2,000. b.credit Labor Price Variance for $2,000. c.debit Labor Quantity Variance for $2,000. d.credit Labor Quantity Variance for $2,000. a160.If a company assigns factory labor to production at a cost of $84,000 when.
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Ex. 185 The Deluxe Division, a profit center of Riley Manufacturing Company, reported the following data for the first quarter of 2016: Sales$9,000,000 Variable costs6,300,000 Controllable direct fixed costs1,200,000 Noncontrollable direct fixed costs530,000 Indirect fixed costs300,000 Instructions (a)Prepare a performance report for the manager of the Deluxe Division. (b)What is the best measure of the manager’s performance?  Why? (c)How would.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  208 The master budget and flexible budgets are important aids to management in performing the management functions of planning and control. Briefly describe how planning and control are facilitated by preparing a master budget and flexible budgets. How are these two types of budgets interrelated with planning.
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Ex. 188 The Pacific Division of Henson Industries reported the following data for the current year. Sales$4,000,000 Variable costs2,600,000 Controllable fixed costs800,000 Average operating assets5,000,000 Top management is unhappy with the investment center’s return on investment (ROI). It asks the manager of the Pacific Division to submit plans to improve ROI in the next year. The.
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Ex. 173 Copper Manufacturing has prepared the following monthly flexible manufacturing overhead budget for its Mixing Department: COPPER MANUFACTURING Monthly Flexible Manufacturing Overhead Budget Mixing Department Activity level Direct labor hours3,0004,000 Variable costs Indirect materials$  3,000$  4,000 Indirect labor15,00020,000 Factory supplies    4,500    6,000 Total variable  22,500  30,000 Fixed costs Depreciation20,00020,000 Supervision12,00012,000  Property taxes  15,000  15,000 Total fixed  47,000  47,000 Total costs$69,500$77,000 Instructions Prepare a flexible budget at the 5,000.
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78.In the Dichter Co., indirect labor is budgeted for $72,000 and factory supervision is budgeted for $24,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked, flexible budget total for these costs is a.$96,000. b.$108,000. c.$105,000. d.$99,000. 79.Stone Industries uses flexible budgets. At normal capacity of 16,000 units, budgeted.
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Ex. 176 Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor$5.00 Indirect materials2.50 Maintenance.50 Utilities.30 Fixed overhead costs per month are: Supervision$1,200 Insurance400 Property taxes600 Depreciation1,800 The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month. During.
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Ex. 186 Danner Co. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows.       Operating Data      Women’s ShoesMen’s ShoesChildren’s Shoes Contribution margin$280,000(3)$220,000 Controllable fixed costs  130,000(4)      (5) Controllable margin     (1)$  90,000    96,000 Sales  800,000  480,000      (6) Variable costs     (2)  330,000  250,000 Instructions (a)Compute the missing amounts. Show computations. (b)Prepare.
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EXERCISES Ex. 170 Clark Company’s master budget reflects budgeted sales information for the month of June, 2016, as follows: Budgeted QuantityBudgeted Unit Sales Price Product A40,000$7 Product B48,000$9 During June, the company actually sold 39,000 units of Product A at an average unit price of $7.10 and 49,600 units of Product B at an average unit.
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Ex. 177 Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $400,000 to $480,000. Variable costs and their percentage relationships to sales are: Sales commissions6% Advertising4% Traveling5% Delivery1% Fixed selling expenses consist of sales salaries $80,000 and depreciation on delivery equipment $20,000. Instructions Prepare a flexible budget for increments of.
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79.Which of the following statements is true? a.Variances are the differences between total actual costs and total standard costs. b.When actual costs exceed standard costs, the variance is favorable. c.An unfavorable variance results when actual costs are decreasing but standards are not changed. d.All of the above are true. 80.Unfavorable materials price and quantity variances.
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COMPLETION STATEMENTS               195.The use of budgets in controlling operations is known as ________________.               196.A major aspect of budgetary control is the use of budget reports that compare _____________________ with _______________________.               197.In analyzing differences from planned objectives, management may take ___________________, or it could decide to modify ___________________.               198.The master budget.
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139.Which of the following is true? a.The form, content, and frequency of variance reports vary considerably among companies. b.The form, content, and frequency of variance reports do not vary among companies. c.The form and content of variance reports vary considerably among companies, but the frequency is always weekly. d.The form and content of variance.
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