Why is historical experience often a poor basis for establishing standards?
> Responsibility for the labor rate variance typically is assigned to a. production. b. labor markets. c. personnel. d. labor unions. e. engineering.
> Responsibility for the materials usage variance is usually assigned to a. the chief executive officer (CEO). b. marketing. c. purchasing. d. personnel. e. production.
> The materials price variance is usually computed a. when goods are finished. b. when materials are issued to production. c. when materials are purchased. d. after suppliers are paid. e. as none of these.
> La Cucina Company sells kitchen supplies and housewares. Lava stone is used in production of molcajetes (mortars and pestles used in the making of guacamole) and is purchased from external suppliers. Each year, 8,000 pounds of lava stone is used; it is c
> Responsibility for the materials price variance typically belongs to a. production. b. purchasing. c. marketing. d. personnel. e. the chief executive officer (CEO).
> Investigating variances from standard is a. always done. b. done if the variance is inside an acceptable range. c. not done if the variance is expected to recur. d. done if the variance is outside the control limits. e. none of these.
> The materials usage variance is computed as a. (SP × AQ) - (AP × SQ). b. (AP × AQ) - (SP × SQ). c. (SP × AQ) - (SP × SQ). d. (AP × SP) - (AQ × SQ). e. None of these.
> The standard direct labor hours allowed is computed as a. Unit Labor Standard × Actual Output. b. Unit Labor Standard × Practical Output. c. Unit Labor Standard × Standard Output. d. Unit Labor Standard × Normal Output. e. Unit Labor Standard × Theoreti
> Historical experience should be used with caution in setting standards because a. they may perpetuate operating inefficiencies. b. ideal standards are always better than historical standards. c. they may not be achievable by operating personnel. d. most
> Which of the following is needed to prepare the production budget? a. Direct materials needed for production b. Direct labor needed for production c. Expected unit sales d. Units of materials in ending inventory e. None of these.
> The first step in preparing the sales budget is to a. prepare a sales forecast. b. review the production budget carefully. c. assess the desired ending inventory of finished goods. d. talk with past customers. e. increase sales beyond the forecast level
> Before a direct materials purchases budget can be prepared, you should first a. prepare a sales budget. b. prepare a production budget. c. decide on the desired ending inventory of materials. d. obtain the expected price of each type of material. e. do
> Which of the following is not part of the operating budget? a. The direct labor budget b. The cost of goods sold budget c. The production budget d. The capital budget e. The selling and administrative expenses budget
> A moving, 12-month budget that is updated monthly is a. not used by manufacturing firms. b. waste of time and effort. c. a master budget. d. a continuous budget. e. always used by firms that prepare a master budget.
> La Cucina Company sells kitchen supplies and housewares. Lava stone is used in production of molcajetes (mortars and pestles used in the making of guacamole) and is purchased from external suppliers. Each year, 8,000 pounds of lava stone is used; it is c
> The budget committee a. reviews the budget. b. resolves differences that arise as the budget is prepared. c. approves the final budget. d. is directed (typically) by the controller. e. does all of these.
> Which of the following is not an advantage of budgeting? a. It forces managers to plan. b. It provides information for decision making. c. It guarantees an improvement in organizational efficiency. d. It provides a standard for performance evaluation. e
> Which of the following items is a possible example of myopic behavior? a. Failure to promote deserving employees b. Reducing expenditures on preventive maintenance c. Cutting back on new product development d. Buying cheaper, lower-quality materials so
> Which of the following is part of the control process? a. Monitoring of actual activity b. Comparison of actual with planned activity c. Investigating d. Taking corrective action e. All of these.
> Which of the following is not an advantage of participative budgeting? a. It encourages budgetary slack. b. It tends to lead to a higher level of performance. c. It fosters a sense of responsibility. d. It encourages greater goal congruence. e. It foste
> Some key budgetary features that tend to promote positive managerial behavior are a. frequent feedback on performance. b. participative budgeting. c. realistic standards. d. well-designed monetary and nonmonetary incentives. e. all of these.
> An ideal budgetary system is one that a. encourages dysfunctional behavior. b. encourages goal-congruent behavior. c. encourages myopic behavior. d. encourages subversion of an organization’s goals. e. does none of these.
> The percentage of accounts receivable that are uncollectible can be ignored for cash budgeting because a. no cash is received from an account that defaults. b. it is included in cash sales. c. it appears on the budgeted income statement. d. for most com
> Assume that a company has the following accounts receivable collection pattern: Month of sale ………………………………. 40% Month following sale ……………………. 60% All sales are on credit. If credit sales for January and February are $100,000 and $200,000, respectively
> The following six situations at Diviney Manufacturing Inc. are independent. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds
> Gorman Nurseries Inc. grows poinsettias and fruit trees in a greenhouse/nursery operation. The following information was provided for the coming year. A sales commission of 4% of sales is paid for each of the two product lines. Direct fixed selling and
> The following six situations at Diviney Manufacturing Inc. are independent. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds
> For each of the following independent situations, give the source document that would be referred to for the necessary information. Required: 1. Direct materials costing $460 are requisitioned for use on a job. 2. Greiner’s Garage uses a job-order costi
> At the beginning of the year, Debion Company estimated the following: Overhead ……………………………………… $522,900 Direct labor hours …………………………….. 83,000 Debion uses normal costing and applies overhead on the basis of direct labor hours. For the month of March,
> Describe the difference between the variable overhead efficiency variance and the labor efficiency variance.
> The variable overhead efficiency variance has nothing to do with efficient use of variable overhead. Do you agree or disagree? Why?
> Explain why the variable overhead spending variance is not a pure price variance.
> What is the purpose of an after-the-fact flexible budget?
> What is the purpose of a before-the-fact flexible budget?
> Explain why mixed costs must be broken down into their fixed and variable components before a flexible budget can be developed.
> Why are flexible budgets superior to static budgets for performance reporting?
> During the most recent year, Osterman Company had the following data: Units in beginning inventory ……….………………………………… — Units produced ..……………………………………………………. 10,000 Units sold ($47 per unit) ………………………………………… 9,300 Variable costs per unit: Direct mat
> What is the difference between an activity flexible budget and a traditional-based flexible budget?
> Explain how an activity-based budget is prepared.
> Which do you think is more important for control of fixed overhead costs: the spending variance or the volume variance? Explain.
> Does the volume variance convey any meaningful information to managers?
> Discuss the differences between static and flexible budgets.
> The budget variance for variable production costs is broken down into quantity and price variances. Explain why the quantity variance is more useful for control purposes than the price variance.
> What is the purpose of a standard cost sheet?
> Discuss the differences among actual costing, normal costing, and standard costing.
> How does standard costing improve the control function?
> Explain why standard costing systems are adopted.
> During the most recent year, Osterman Company had the following data: Units in beginning inventory ……….………………………………… — Units produced ..……………………………………………………. 10,000 Units sold ($47 per unit) ………………………………………… 9,300 Variable costs per unit: Direct mat
> What are ideal standards? Currently attainable standards? Of the two, which is usually adopted? Why?
> Describe the relationship that unit standards have with flexible budgeting.
> What is kaizen costing? On which part of the value chain does kaizen costing focus?
> Suggest some possible causes of an unfavorable labor efficiency variance.
> The labor rate variance is never controllable. Do you agree or disagree? Why?
> The materials usage variance is always the responsibility of the production supervisor. Do you agree or disagree? Why?
> Explain why the materials price variance is often computed at the point of purchase rather than at the point of issuance.
> What are control limits, and how are they set?
> When should a standard cost variance be investigated?
> In assigning costs to goods transferred out, how do the weighted average and FIFO methods differ?
> Discuss the difference between budgets and standard costs.
> Why is it important for a manager to receive frequent feedback on his or her performance?
> Why is goal congruence important?
> What is a master budget? An operating budget? A financial budget?
> Discuss some reasons for budgeting.
> Define control. How are budgets used to control?
> Explain how a manager can milk the firm to improve budgetary performance.
> Explain why a manager has an incentive to build slack into the budget.
> A budget too easily achieved will lead to diminished performance. Do you agree? Explain.
> Define the term budget. How are budgets used in planning?
> During the most recent year, Judson Company had the following data associated with the product it makes: Units in beginning inventory ………………………….. 300 Units produced …………………………………………. 15,000 Units sold ($300 per unit) …………………………. 12,700 Variable costs p
> Explain why, in the traditional view of inventory, carrying costs increase as ordering costs decrease.
> What are the reasons for carrying inventory?
> What are stockout costs?
> What are ordering costs? Carrying costs? Give examples of each.
> What is the difference between contribution margin and segment margin?
> What is a segment?
> If a company produces 10,000 units and sells 8,000 units during a period, which method of computing operating income (absorption costing or variable costing) will result in the higher operating income? Why?
> What approach does JIT take to minimize total inventory costs?
> Explain how safety stock is used to deal with demand uncertainty.
> What is the economic order quantity?
> Under the weighted average method, how are prior period costs and output treated? How are they treated under the FIFO method?
> What is the difference between the unit cost of a product under absorption costing and variable costing?
> Describe the value of activity-based customer costing.
> Explain how costs are assigned to activities.
> What is an activity dictionary?
> What is activity-based product costing?
> What is an overhead consumption ratio?
> What is meant by ‘‘product diversity’’?
> What are nonunit-level overhead activities? Nonunit-based cost drivers? Give some examples.
> Describe the two-stage process for departmental overhead rates.
> What is cycle time? Velocity?
> What is a production report? What purpose does this report serve?
> What are nonvalue-added activities? Nonvalue-added costs? Give an example of each.
> What is driver analysis? What role does it play in process-value analysis?
> Explain how ABC can help a firm identify its true low-cost suppliers.
> What are equivalent units? Why are they needed in a process-costing system?
> How does the adoption of a JIT approach to manufacturing affect process costing?
> Identify some possible causal factors for the following support departments: a. Cafeteria b. Custodial services c. Laundry d. Receiving, shipping, and storage e. Maintenance f. Personnel g. Accounting
> Why is it important to identify and use causal factors to allocate support department costs?
> How would process costing for services differ from process costing for manufactured goods?
> Describe the difference between producing and support departments.
