Acc 132 Final Exam
Acc 132 Final Exam Accounting 132 Managerial accounting
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This 10 page Study Guide was uploaded by Ricardo Gaytan on Thursday May 5, 2016. The Study Guide belongs to Accounting 132 Managerial accounting at Illinois State University taught by Marie Dawson in Spring 2016. Since its upload, it has received 32 views.
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Date Created: 05/05/16
Accounting 132 Marie Dawson Final Exam 1. managerial accounting places greater emphasis on the future than financial accounting which is primarily concerned with the past true 2. Although financial and managerial accounting differ in many ways, they are similar in that both rely on the same underlying financial data. Answer: True Level: Medium 3. Depreciation on office equipment would not be included in the cost of goods manufactured. Answer: True Level: Easy 4. GAAP is mandatory for financial accounting, but not be included in the cost of goods manufactured. True 5. 1. The fact that one department may be labor intensive while another department is machine intensive may explain in part the existence of multiple predetermined overhead rates in larger companies. True 6. Rent on a factory building used in the production process would be classified as a period cost and as a fixed cost. False 7. 1. The following entry would be used to record the transfer of material from the storeroom to production if 80% of the material was direct material and 20% was indirect material Work in process 40,000 Manufacturing overhead 10,000 Raw material inventory 50,000 True 8. manufacturing overhead is an indirect cost with respects to units of production true 9. Depreciation on equipment a company uses in its selling and administrative activities would be classified as a product cost Accounting 132 Marie Dawson Final Exam False 10. The formula for computing the predetermined overhead rate is: Estimated total units in base / Estimated total manufacturing costs False 11. If a company closes andunder or overapplied overhead to the Cost of Goods Sold account, the Cost ofGoods Sold will be credited if manufacturing overhead is over applied for theperiod TRUE 12. The contribution margin represents the amount available to contribute toward covering fixed expenses and toward profits for the period. True 13. The phase of accounting concerned with providing information to stockholders, creditors, and others outside the organization is known as financial accounting True 14. When raw materials are purchased, they are recorded as an expense False 15. if the actual manufacturing overhead costs for a period exceeds the manufacturing overhead cost applied then overhead would be considered to be over applied false 16. a variable cost is a cost that remains constant in total throughout wide ranges of activity false 17. if the activity level increases then one would expect the variable cost per unit to increase as well false 18. the contribution income statement organizes costs according to behavior true 19. most companies use the contribution approach in preparing financial statements for external reporting purposes false 20. Accounting 132 Marie Dawson Final Exam committed fixed costs cannot be reduced to zero without seriously impairing the company's long term goals true 21. managerial accounting GAAP is not mandatory 22. conversion costs direct labor manufacturing overhead 23. this is made up of units of product that are only partially complete and will require further work before they are ready for sale to a customer work in process 24. these are factory labor costs that can be easily traced to individual units of product direct labor 25. used to charge overhead cost to jobs established in advance for each period using estimates of total manufacturing overhead cost and of the total allocation base for the period predetermined overhead rate 26. range of activity within which assumptions about variable and fixed cost behavior are valid relevant range 27. contains both variable and fixed cost elements mixed costs 28. a measure of whatever causes the incurrence of a variable cost for example cost of x ray film in a hospital will increase as the number of x rays taken increases activity base 29. there are small items of material such as glue and nails that may become n integral part of a finished product but are traceable to the product only at great cost indirect materials 30. a cost incurred in the past that is not relevant to any current decision sunk cost 31. a detailed financial plan for the future is known as a Accounting 132 Marie Dawson Final Exam budget 32. the sales budget is usually prepared before the production budget true 33. the cash budget is the starting point in preparing the master budget false 34. when preparing a direct materials budget beginning inventory for raw materials should be added to production needs and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased false 35. the number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory true 36. on a cash budget the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment true 37. the main difference between flexible budget and a static budget is that a flexible budget does not contain fixed costs false 38. a revenue variance is unfavorable if the actual revenue is less than what the revenue should have been for the actual level of activity for the period true 39. a planning budget is prepared before the period begins and is valid for only the planned level of activity true 40. a flexible budget is an estimate of what revenues and cost should have been given the level of activity that had been planned for the period false 41. it is not important that the activity base and overhead costs be casually related when developing a flexible budget false Accounting 132 Marie Dawson Final Exam 42. practical standards allow for normal machine downtime and employee rest periods true 43. in zero base budgeting only changes from the prior budget must be justified false 44. a direct material quantity standard generally includes an allowance for waste true 45. most companies compute the materials price variance when materials are placed into production false 46. an unfavorable labor rate variance can occur if workers with high hourly wages rates are assigned to work on products whose standards assume workers with low hourly wage rates true 47. in a standard cost system overhead is applied on the basis of the actual level of activity rather than the standard level of activity allowed for the output of a period false 48. a company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor hours the company choice of the denominator level of activity allowed for the output of a period false 49. there can be no volume variance for variable overhead true 50. budget variances arise when the actual amount spent on fixed overhead items is different from the stated budget for fixed overhead true 51. the volume variance for fixed overhead is an activity related variance based on the difference between the denominator level of activity and the standard level of activity allowed for the output of a period true 52. Accounting 132 Marie Dawson Final Exam Used to charge overhead cost to jobs; established in advance for each period using estimates of total manufacturing overhead cost and of the total allocation base for the period. Predetermined Overhead Rate 53. A budget that is designed to cover a range of activity and that can be used to develop budgeted costs at any point within the range to compare to actual costs incurred flexible budget 54. The amount of materials that should have been used to compute the period’s actual output, it is computed by multiplying the actual number of units produced by the standards quantity per unit. STANDARD QUALITY ALLOWED 55. A detailed listing of the standard amounts of inputs that should go into a unit of product, multiplied by the standard price or rate that has been set for each input standard cost card 56. A budget created at the beginning of the budgeting period that is valid only for the planned level of activity Planning or static budget 57. the activity figure used to compute the predetermined overhead rate denominator activity 58. difference between budgeted fixed overhead and actual fixed overhead budget variance 59. Name of the variance that can occur for direct labor or variable overhead and is the indicator of the time actually spent and the time allowed given the actual output achieved Efficiency variance 60. The variance that arises whenever the standard hours allowed for the output of a period are different from the denominator activity level that was used to compute the predetermined overhead rate Volume variance 61. standards that allow for no machine breakdowns or other work interruptions and at all times ideal standards 62. Accounting 132 Marie Dawson Final Exam A variance that is computed by taking the difference between the actual price and the standard price and multiplying the result by the actual quantity of the input Price variance 63. A detailed plan showing how cash resources will be acquired and used over a specific time period. It is developed from several budgets that must be adjusted for noncash items like depreciation expense cash budget 64. consists of a number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals master budget 65. The amount of an input that should be required to complete a single unit of product, of product, including allowances for normal waste, spoilage and rejects Standard quantity per unit 66. Use of this type of budget for performance evaluations is not advised due to the fact that it may never be achieved and negatively affect moral among the workers ideal budget 67. A rate used to charge manufacturing overhead cost to items produced that is established in advance for each period. It can be found on the manufacturing overhead budget. It can be split into variable and fixed portions PREDETERMINED OVERHEAD RATE 68. A detailed plan showing the production costs, other than direct materials and direct labor that will be incurred over a specified time period OVERHEAD BUDGET 69. a management system in which standards are set for various management by exception 70. Avoidable cost A cost that can be eliminated by choosing one alternative over another in a decision. synonymous with differential and relevant cost 71. bottleneck limits the total output of the entire system 72. constraint Accounting 132 Marie Dawson Final Exam a limitation under which a company must operate such as limited available machine time or raw materials that restricts the company's ability to satisfy demand 73. differential cost a difference in cost between any two alternatives 74. differential revenue a difference in revenue between any two alternatives 75. joint costs costs that are incurred up to the split off point in a process that produces joint products 76. joint products two or more products that are produced from a common input 77. make or buy decision a decision concerning whether an item should be produced internally or purchased from an outside supplier 78. opportunity cost the potential benefit that is given up when one alternative is selescted over another 79. relaxing or elevating the constraint an action that increases the amount of a constrained resource equivalently an action that increases the capacity of the bottleneck 80. relevant benefit a benefit that differs between alternatives in decision. differential revenue s a relevant benefit 81. relevant cost a difference in cost between any two alternative synonyms are avoidable, differential, and incremental cost 82. sell or process further decision a decision as to whether a joint product should be sold at the split off point or sold after further processing 83. special order a one time order that is not considered part of the company;s normal ongoing business 84. Accounting 132 Marie Dawson Final Exam split off point that point in manufacturing process where some or all of the joint products can be recognized as individual products 85. sunk cost any cost that has already been incurred and that cannot be changed by any decision made now or in the future 86. vertical integration the involvement by a company in more than one of the activities in the entire value chain from development through production distribution sales and after sales service 87. cash equivalents short term highly liquid investments such as treasury bills commercial paper and money market funds that are made solely for the purpose of generating a return on temporarily idle funds 88. direct method a method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom 89. financing activities these activities generate cash inflows and outflows related to borrowing from and repaying principal to creditors and completing transactions with the company's owners such as selling or repurchasing shares of common stock and paying dividends 90. free cash flow a measure that assesses a company's ability to fund its capital expenditures and dividends from its net cash provided by operating activities 91. indirect method a method of computing the net cash provided by operating activities that starts with net income and adjusts it to a cash basis 92. investing activities these activities generate cash inflows and outflows related to acquiring or disposing of noncurrent assets such as property plant and equipment long term investments and loans to another entity 93. net cash provided by operating activites the net result of the cash inflows and outflows arising from day to day operations Accounting 132 Marie Dawson Final Exam 94. operating activities these activities generate cash inflows and outflows related to revenue and expense transactions that affect net income 95. statement of cash flows a financial statement that highlights the major activities that impact cash flows and hence affect the overall cash balance
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