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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

What circumstances may cause the purchasing department to be responsible for both an unfavorable materials price variance and an unfavorable materials quantity variance?AppendixLO1
How often should variances be reported to management?What principle may be used with variance reports?AppendixLO1
Mikan Company’s standard predetermined overhead rate is $9 per direct labor hour. For the month of June, 26,000 actual hours were worked, and 27,000 standard hours were allowed. How much overhead
In the direct labor variance matrix, there are three factors: (1) Actual hours 3 Actual rate, (2) Actual hours 3 Standard rate, and (3) Standard hours 3 Standard rate. Using the numbers, indicate the
In each of the following formulas, supply the words that should be inserted for each number in parentheses.(a) (Actual quantity 3 (1)) 2 (Standard quantity 3(2)) 5 Total materials variance(b) ((3) 3
What is the difference between a favorable cost variance and an unfavorable cost variance?AppendixLO1
How is the predetermined overhead rate determined when standard costs are used?AppendixLO1
“The objective in setting the direct labor quantity standard is to determine the aggregate time required to make one unit of product.” Do you agree? What allowances should be made in setting this
What factors should be considered in setting (a) the direct materials price standard and (b) the direct materials quantity standard?AppendixLO1
Distinguish between an ideal standard and a normal standard.AppendixLO1
Contrast the roles of the management accountant and management in setting standard costs.AppendixLO1
Standard costs facilitate management planning.What are the other advantages of standard costs?AppendixLO1
(a) Explain the similarities and differences between standards and budgets.(b) Contrast the accounting for standards and budgets.AppendixLO1
(a) “Standard costs are the expected total cost of completing a job.” Is this correct? Explain.(b) “A standard imposed by a governmental agency is known as a regulation.” Do you agree?
The formula to compute the overhead volume variance is:(a) Fixed overhead rate 3 (Standard hours 2 Actual hours).(b) Fixed overhead rate 3 (Normal capacity hours 2 Actual hours).(c) Fixed overhead
Which of the following is incorrect about a standard cost accounting system?(a) It is applicable to job order costing.(b) It is applicable to process costing.(c) It reports only favorable
Which of the following would not be an objective used in the customer perspective of the balanced scorecard approach?(a) Percentage of customers who would recommend product to a friend.(b) Customer
Generally accepted accounting principles allow a company to:(a) report inventory at standard cost but cost of goods sold must be reported at actual cost.(b) report cost of goods sold at standard cost
In using variance reports to evaluate cost control, management normally looks into:(a) all variances.(b) favorable variances only.(c) unfavorable variances only.(d) both favorable and unfavorable
Which of the following is incorrect about variance reports?(a) They facilitate “management by exception.”(b) They should only be sent to the top level of management.(c) They should be prepared as
The formula for computing the total overhead variance is:(a) actual overhead less overhead applied.(b) overhead budgeted less overhead applied.(c) actual overhead less overhead budgeted.(d) No
Which of the following is correct about the total overhead variance?(a) Budgeted overhead and budgeted overhead applied are the same.(b) Total actual overhead is composed of variable overhead, fixed
In producing product ZZ, 14,800 direct labor hours were used at a rate of $8.20 per hour. The standard was 15,000 hours at $8.00 per hour. Based on these data, the direct labor:(a) quantity variance
In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is:(a) $330
Each of the following formulas is correct except:(a) Labor price variance 5 (Actual hours 3 Actual rate) 2 (Actual hours 3 Standard rate).(b) Total overhead variance 5 Actual overhead 2 Overhead
The setting of standards is:(a) a managerial accounting decision.(b) a management decision.(c) a worker decision.(d) preferably set at the ideal level of performance.AppendixLO1
Normal standards:(a) allow for rest periods, machine breakdowns, and setup time.(b) represent levels of performance under perfect operating conditions.(c) are rarely used because managers believe
The advantages of standard costs include all of the following except:(a) management by exception may be used.(b) management planning is facilitated.(c) they may simplify the costing of
Standard costs:(a) are imposed by governmental agencies.(b) are predetermined unit costs which companies use as measures of performance.(c) can be used by manufacturing companies but not by service
Standards differ from budgets in that:(a) budgets but not standards may be used in valuing inventories.(b) budgets but not standards may be journalized and posted.(c) budgets are a total amount and
Describe the balanced scorecard approach to performance evaluation.AppendixLO1
Prepare an income statement for management under a standard costing system.AppendixLO1
Discuss the reporting of variances.AppendixLO1
State the formula for determining the total manufacturing overhead variance.AppendixLO1
State the formulas for determining direct materials and direct labor variances.AppendixLO1
Describe how companies set standards.AppendixLO1
Identify the advantages of standard costs.AppendixLO1
Distinguish between a standard and a budget.AppendixLO1
Presented below is selected financial information for two divisions of Yono Brewing.Lager Lite Lager Contribution margin $500,000 $ 300,000 Controllable margin 200,000 (c)Average operating assets (a)
Presented below is selected information for three regional divisions of Medina Company.Divisions North West South Contribution margin $ 300,000 $ 500,000 $ 400,000 Controllable margin $ 140,000 $
The Pletcher Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using
The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers:
The West Division of Nieto Company reported the following data for the current year.Sales $3,000,000 Variable costs 1,980,000 Controllable fi xed costs 600,000 Average operating assets 5,000,000 Top
The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2014 at $900,000. The only variable costs budgeted for the division were
Deitz Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows.Operating Data Women’s Shoes Men’s Shoes
The Mixing Department manager of Malone Company is able to control all overhead costs except rent, property taxes, and salaries. Budgeted monthly overhead costs for the Mixing Department, in
Fultz Company’s organization chart includes the president; the vice president of production; three assembly plants—Dallas, Atlanta, and Tucson; and two departments within each plant—Machining
Venetian Company has two production departments, Fabricating and Assembling.At a department managers’ meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate
Kirkland Plumbing Company is a newly formed company specializing in plumbing services for home and business. The owner, Lenny Kirkland, had divided the company into two segments: Home Plumbing
As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October.SORIA COMPANY Clothing Department
Lowell Company’s manufacturing overhead budget for the first quarter of 2014 contained the following data.Variable Costs Fixed Costs Indirect materials $12,000 Supervisory salaries $36,000 Indirect
Rensing Groomers is in the dog-grooming business. Its operating costs are described by the following formulas:Grooming supplies (variable) y 5 $0 1 $5x Direct labor (variable) y 5 $0 1 $14x Overhead
Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current
The actual selling expenses incurred in March 2014 by DeWitt Company are as follows.Variable Expenses Fixed Expenses Sales commissions $11,000 Sales salaries $35,000 Advertising 6,900 Depreciation
DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are
Using the information in E22-3, assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.Variable Costs Fixed Costs Indirect labor $8,800 Supervision $4,000 Indirect
Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.Indirect labor $1.00 Indirect
Crede Company budgeted selling expenses of $30,000 in January, $35,000 in February, and $40,000 in March. Actual selling expenses were $31,200 in January, $34,525 in February, and $46,000 in
Mike Trusler has prepared the following list of statements about budgetary control.1 Budget reports compare actual results with planned objectives.2 All budget reports are prepared on a weekly
The service division of Raney Industries reported the following results for 2013.Sales $500,000 Variable costs 300,000 Controllable fixed costs 75,000 Average operating assets 625,000 Management is
The Wellstone Division operates as a profit center. It reports the following for the year.Budget Actual Sales $2,000,000 $1,860,000 Variable costs 800,000 760,000 Controllable fixed costs 550,000
Mussatto Company expects to produce 50,000 units of product IOA during the current year. Budgeted variable manufacturing costs per unit are direct materials $7, direct labor $13, and overhead $18.
In Pargo Company’s flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $90,000. The total budgeted cost line is$330,000 at an activity level
Presented below is information related to the Southern Division of Lumber, Inc.Contribution margin $1,200,000 Controllable margin $ 800,000 Average operating assets $4,000,000 Minimum rate of return
Voorhees, Inc. reports the following financial information.Average operating assets $3,000,000 Controllable margin $ 660,000 Minimum rate of return 10%Compute the return on investment and the
Data for the investment centers for Kaspar Company are given in BE22-9. The centers expect the following changes in the next year: (I) increase sales 15%; (II) decrease costs $400,000; (III) decrease
For its three investment centers, Kaspar Company accumulates the following data:I II III Sales $2,000,000 $4,000,000 $ 4,000,000 Controllable margin 1,300,000 2,000,000 3,600,000 Average operating
For the year ending December 31, 2014, Cobb Company accumulates the following data for the Plastics Division which it operates as an investment center: contribution margin—$700,000 budget, $710,000
Elbert Company accumulates the following summary data for the year ending December 31, 2014, for its Water Division, which it operates as a profit center: sales—$2,000,000 budget, $2,080,000
In the Assembly Department of Hannon Company, budgeted and actual manufacturing overhead costs for the month of April 2014 were as follows.Budget Actual Indirect materials $16,000 $14,300 Indirect
Gundy Company expects to produce 1,200,000 units of Product XX in 2014.Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct
In Paige Company, direct labor is $20 per hour. The company expects to operate at 10,000 direct labor hours each month. In January 2014, direct labor totaling $204,000 is incurred in working 10,400
Data for Maris Company are given in BE22-1. In the second quarter, budgeted sales were $380,000, and actual sales were $384,000. Prepare a static budget report for the second quarter and for the year
For the quarter ended March 31, 2014, Maris Company accumulates the following sales data for its product, Garden-Tools: $310,000 budget; $305,000 actual. Prepare a static budget report for the
What is residual income, and what is one of its major weaknesses?AppendixLO1
What is a major disadvantage of using ROI to evaluate investment and company performance?AppendixLO1
Indicate two behavioral principles that pertain to (a)the manager being evaluated and (b) top management.AppendixLO1
Explain the ways that ROI can be improved.AppendixLO1
What is the primary basis for evaluating the performance of the manager of an investment center? Indicate the formula for this basis.AppendixLO1
Jane Nott is confused about controllable margin reported in an income statement for a profit center.How is this margin computed, and what is its primary purpose?AppendixLO1
How do direct fixed costs differ from indirect fixed costs? Are both types of fixed costs controllable?AppendixLO1
(a) What costs are included in a performance report for a cost center? (b) In the report, are variable and fixed costs identified?AppendixLO1
Distinguish among the three types of responsibility centers.AppendixLO1
What is the relationship, if any, between a responsibility reporting system and a company’s organization chart?AppendixLO1
How do responsibility reports differ from budget reports?AppendixLO1
Distinguish between controllable and noncontrollable costs.AppendixLO1
Eve Rooney is studying for an accounting examination.Describe for Eve what conditions are necessary for responsibility accounting to be used effectively.AppendixLO1
What is responsibility accounting? Explain the purpose of responsibility accounting.AppendixLO1
What is management by exception? What criteria may be used in identifying exceptions?AppendixLO1
The flexible budget formula is fixed costs $50,000 plus variable costs of $4 per direct labor hour. What is the total budgeted cost at (a) 9,000 hours and(b) 12,345 hours?AppendixLO1
Cali Company has prepared a graph of flexible budget data. At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $20,000. At 10,000 direct labor hours, the line
Megan Pedigo is confused about how a flexible budget is prepared. Identify the steps for Megan.AppendixLO1
A static overhead budget based on 40,000 direct labor hours shows Factory Insurance $6,500 as a fixed cost.At the 50,000 direct labor hours worked in March, factory insurance costs were $6,300. Is
The static manufacturing overhead budget based on 40,000 direct labor hours shows budgeted indirect labor costs of $54,000. During March, the department incurs $64,000 of indirect labor while working
“A flexible budget is really a series of static budgets.”Is this true? Why?AppendixLO1
Under what circumstances may a static budget be an appropriate basis for evaluating a manager’s effectiveness in controlling costs?AppendixLO1
Ken Bay questions the usefulness of a master sales budget in evaluating sales performance. Is there justification for Ken’s concern? Explain.AppendixLO1
How may a budget report for the second quarter differ from a budget report for the first quarter?AppendixLO1
The following purposes are part of a budgetary reporting system: (a) Determine efficient use of materials.(b) Control overhead costs. (c) Determine whether income objectives are being met. For each
(a) What is budgetary control?(b) Fred Barone is describing budgetary control. What steps should be included in Fred’s description?AppendixLO1

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