Accounting 2 - Final Exam with Answers

Accounting 2 - Final Exam with Answers If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed: Select one: a. time variance b. price variance c. quantity variance d. rate variance - ANSWER- A If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is termed: Select one: a. controllable variance b. price variance c. quantity variance d. rate variance - ANSWER- C Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a: Select one: a. quantity variance b. controllable variance c. volume variance d. rate variance - ANSWER- B The formula to compute direct material quantity variance is to calculate the difference between Select one: a. actual costs - standard costs b. standard costs - actual costs c. (actual quantity * standard price) - standard costs d. actual costs - (standard price * standard costs) - ANSWER- C Total manufacturing cost variance includes: Select one: a. Direct materials price variance, direct labor cost variance, and fixed factory overhead volume variance b. Direct materials cost variance, direct labor rate variance, and factory overhead cost variance c. Direct materials cost variance, direct labor cost variance, variable factory overhead controllable variance d. Direct materials cost variance, direct labor cost variance, factory overhead cost variance - ANSWER- D An unfavorable cost variance means that actual cost is greater than standard cost. Select one: True False - ANSWER- True An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work. Select one: True False - ANSWER- True Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area. Select one: True False - ANSWER- False It is correct to rely exclusively on past cost data when establishing standards. Select one: True False - ANSWER- False Standard cost variances are usually not reported in reports to stockholders. Select one: True False - ANSWER- True Standard costs serve as a device for measuring efficiency. Select one: True False - ANSWER- True The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance. Select one: True False - ANSWER- True The standard cost is how much a product should cost to manufacture. - ANSWER- True In most businesses, cost standards are established principally by accountants. - ANSWER- False Changes in technology, machinery, or production methods may make past cost data irrelevant when setting standards. - ANSWER- True Standard cost variances are usually not reported in reports to stockholders. - ANSWER- True A favorable cost variance means that that the actual cost is more than the standard cost. - ANSWER- False The principle of exceptions allows managers to: A. focus on correction variances between standard costs and actual costs B. focus on correction variances between variable cost and actual costs C. focus on correction variances between competitors cost and actual costs - ANSWER- A Periodic comparisons between planned objectives and actual performance are reported to: A. zero-based reports B. budget performance reports C. master budgets - ANSWER- B If the actual quantity of direct materials is used in producing a commodity differs from the standard quantity, the variance is termed: A. controllable variance B. price variance C. quantity variance - ANSWER- C If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is termed: A. variable variance B. rate variance C. quantity variance - ANSWER- B The ratio of sales to investment is termed the rate of return on investment. Select one: True False - ANSWER- False Which of the following would not be considered an internal centralized service department? Select one: a. Information systems department b. Manufacturing department c. Purchasing department d. Payroll accounting department - ANSWER- B For lower levels of management, responsibility accounting reports: Select one: a. are rarely provided or reviewed b. are more detailed than for higher levels of management c. contain about the same level of detail as reports for all levels of management d. are more summarized than for higher levels of management - ANSWER- B Which of the following expressions is termed the profit margin factor as used in determining the rate of return on investment? Select one: a. Sales/Income From Operations b. Invested Assets/Sales c. Sales/Invested Assets d. Income From Operations/Sales - ANSWER- D The three common types of responsibility centers are referred to as cost centers, profit centers, and investment centers. Select one: True False - ANSWER- True A decentralized business organization is one in which all major planning and operating decisions are made by top management. Select one: True False - ANSWER- False Which of the following is a disadvantage of decentralized operation? Select one: a. Managers are not retained due to all the responsibility. b. Competition is among managers may decrease profits c. Assets are duplicated d. Duplication of operations - ANSWER- B Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers? Select one: a. Market Price b. Negotiated Price c. Cost Price d. Variable Price - ANSWER- A Identify the formula for the rate of return on investment. Select one: a. Sales/Invested Assets b. Income From Operations/Sales c. Income From Operations/Invested Assets d. Invested Assets/Income From Operations - ANSWER- C Under the market-price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers. Select one: True False - ANSWER- True The profit center income statement should include only controllable expenses. Select one: True False - ANSWER- False The major advantage of residual income as a performance measure is that it gives consideration to only a minimum rate of return on investment. Select one: True False - ANSWER- False Two division of Central Company (Divisions X and Y) have the same profit margins. Division X's investment turnover is larger than that of Division Y (1.2 to 1.0). Income from operations for Division X is $50,000, and income from operations for Division Y is $38,000. Division X has a higher return on investment than Division Y by: Select one: a. applying a negotiated price measure b. using its assets more efficiently in generating sales c. comparing income from operations d. using income from operations as a performance measure - ANSWER- B The following is a measure of a manager's performance working in a cost center. Select one: a. balance sheet b. budget performance report