true
T/F?
it is more important for info used for inc acct purposes to be comparable between firms than to be useful for managerial decision making
manufacturing overhead
in a job order cost system, the use of factory supplies would usually be recorded as a debit to:
product cost: yes
prime cost: no
how would the cost of utilities used in the factory generally be classified?
cost of industrial grade kitty litter spread on factory floor to absorb oil from the manufacturing machines
ex of what would be considered a product cost for external financial reporting purposes
FG inv has increased during the period
what is the outcome if the COGS sold is less than the COGM
fixed costs
expressed on a per unit basis will change inversely with changes in activity
accountants' assumptions about the behavior of these rest heavily on the concept of the relevant range
FC frequently represent long term investments in plant, property, and equip
false
T/F?
expressing this on a per unit basis usually is the best approach for decision making
supplies
ex: office supplies - period cost
factory supplies - could be product cost
ex of what could be considered a product or period cost depending on the purpose
false
T/F?
over applied overhead occurs when the actual overhead costs incurred during a period are higher than the overhead costs applied during the period
it is part of the ending balance of the work in process inventory account
in a job cost system, how is the amount of overhead cost treated that has been applied to a job that remains incomplete at the end of a period
true
T/F?
raw materials purchases are classified as assets as soon as we receive them
false
T/F?
the WIP acct is cleared to the manu overhead clearing acct for fiscal reporting purposes, either monthly, or at year end or as the case may be
true
T/F?
the MOH clearing acct may be cleared to WIP and/or FG and/or COGS and/or all three
true
T/F?
when MOH costs are actually incurred, their costs flow through the regular purchases, payables and payments cycle
sales budget
the master budget usually begins with the:
budgeted income statement
budget that provides info for preparation of the owner's equity section of a budgeted balance sheet
false
T/F?
the JE to record the usage of indirect materials is a debit to manufacturing overhead control/clearing and a credit to accounts payable
true
T/F?
sales projections are often the most difficult part of the budgeting process bc it involves a considerable amount of subjectivity
false
T/F?
sales projections are simple to accurately forecast
false
T/F?
individual managers' beliefs and expectations are never incorporated into the budgeting process
false
T/F?
labor budgets are prepared by using last year's actual hours worked regardless of this year's expected output
false
T/F?
the cash budget is normally prepared before the budgeted income statement
true
T/F?
the sales budget drives the rest of the budgeting process for both manufacturers and merchandisers
true
T/F?
the production budget is unnecessary for a service organization
true
T/F?
if managers are rewarded on successfully meeting budgeted figures, then they have incentive to set easily achievable budgets
cash budget
which of these would be the last budget prepared in the master budget preparation process?
- COGS budget
- mktg cost budget
- DL budget
- cash budget
accounts receivable
cash disbursements would not include payments for:
divs, income taxes, capital expenditures
cash disbursements would include payments for:
false
T/F?
the reason opportunity costs are not included in the accounting system is bc they involve estimates
true
T/F?
target costs equal the difference between the target selling price and the desired profit margin
true
in the short run, plant capacity is fixed and product choices should optimize the use of available capacity
true
T/F?
avoidable costs are relevant costs
short run
the period of time over which capacity will be unchanged is the:
scheduling sales managers' vacations
managers of cost centers are responsible for all of the following except:
- FC associated with the rental of the manu facilities
- VC associated with the primary materials used in the product
- scheduling sales managers' vacations
- costs to maintain and
true
T/F?
one adv of decentralization is faster response time by local managers in problem solving
true
T/F?
decentralization is the delegation of authority to lower level managers
false
T/F?
rational managers always make decisions that are in the best interest of the firm
true
T/F?
properly developed and implemented mgmt control systems influence managers to act in the org's best interest
false
T/F?
in general, profit centers are more complex to operate than investment centers
knowledge of local conditions
which of the following elements is not an element of a MCS?
- resp centers/delegation of authority
-compensation and performance eval system
- knowledge of local conditions
- budgeting
determining which ways to expand and grow the company, and which assets to purchase to do so
an operating unit of an organization is called an investment center if it is responsible mainly for....
investment center
responsibility center that would be evaluated similarly to an independent business
sub optimal decision making
a manager makes a decision that is beneficial for a specific investment center, but not for the entire organization. this decision results in:
only the costs that the manager can influence in the current period
a cost center's manager is evaluated by those costs that are controllable. controllable costs are best described as including:
centralization -- maximum constraints and minimum freedom for lower management
combo that reflects a true pairing of a method of organization and one of its corresponding traits
profit margin ratio
return on investment (ROI) can be decomposed into the asset turnover and the...
true
T/F?
if a division's return on investment (ROI) exceeds its cost of capital, then it's residual income is positive
true
T/F?
if a division's cost of capital equals its return on investment (ROI), then its residual income is zero
the variable costs plus the opportunity cost of the selling division is less than the external price for the buying division
an internal transfer between two divisions is in the best economic interest of the entire org when:
true
T/F?
prices are decreased when demand is weak and competition is strong and increased when demand is strong and competition is weak
false
T/F?
companies that produce high quality products dont have to pay attention to the actions of their competitors
false
T/F?
companies won't benefit from examining pricing decisions from the perspective of their customers
false
T/F?
when prices are mkt driven, product costs are the most important influence on pricing decisions
false
T/F?
companies are savvy and make purchase decisions based on concrete facts without allowing their perceptions about product quality to sway them
a return in excess of the initial investment
if the net present value of a feasible project is positive, it could signal:
true
T/F?
value engineering is a key element in target costing
true
T/F?
in a target costing approach, the price is set before the target unit cost is determined
false
T/F?
a new products target cost is the projected short term cost that will enable a firm to enter and remain in a mkt
true
T/F?
if the projected cost of a new product is above the target cost, efforts are made to eliminate non value added costs to bring down the unit cost
true
T/F?
the primary decision for special orders is determining whether the differential rev is greater than the differential costs associated with the order
true
T/F?
the differential analysis approach to pricing for the special orders could lead to underpricing in the long run bc FCs aren't included in the analysis
false
T/F?
a capital budget spans a 1 year period
true
T/F?
cap budgeting may involve the expansion of production capacity or remodeling of current facilities
true
T/F?
capital budgeting may involve new product development, either before or after the purchase
true
T/F?
a cap budgeting decision may entail incremental operating inflows and outflows compared to the status quo
NPV method
in situations where the required rate of return is not constant for each year of the project, it is advantageous to use...
false
T/F?
profit margins are often set to earn a reasonable return on investment for short-term pricing decisions but not for long term pricing decisions
false
T/F?
expressing VC in total (instead of on per unit basis) causes them to act like fixed costs
false
T/F?
a common decision in relevant costing is the insource vs resource option
false
T/F?
depreciation represents an incremental/relevant cost
true
T/F?
using CM pricing for special orders could lead to underpricing in the long term
market willingness to pay less desired profit
a target cost is computed as:
true
T/F?
manu co sells 2 items: product A and product B
product A has higher CM ratio than B
if product mix shifts towards product B, the co's BE point in total units will increase overall
rent expense has increased, per unit
rent expense is a fixed cost in my company and sales commissions are variable. this year my production volume decreased. in terms of cost per unit, I expect that....
false
T/F?
An increase in the beginning finished goods inventory will lead to an increase in the budgeted level of production in units.
indirect
normal costing uses estimates only for which costs
The service company has no unsold services kept on the balance sheet and sold services reduce Net Income on the income statement; the manufacturing company keeps unsold goods and finished goods on the balance sheet and sold goods reduce Net Income on the
How does the balance sheet and income statement for a service company differ from a manufacturing company?
variable, period cost
How would a 5% sales commission paid to sales personnel be classified in a manufacturing company?
products are sold
The cost of the direct labor will be treated as an expense on the income statement when the resulting
false
T/F?
Total variable costs change inversely with changes in the volume of activity
production budget
which budget provides the info needed to prepare the direct labor budget
true
T/F?
When operating within the relevant range, a company does not need to consider its already-established fixed costs when considering a special order.
true
T/F?
Contribution margin is a larger number than operating income.
false
T/F?
Contribution margin is found by subtracting variable selling costs from sales.
true
T/F?
DOL measures the sensitivity of a firm's Operating Income to a change in Sales.
true
T/F?
Value engineering is a key element in target costing.
true
T/F?
In a target costing approach, the price is set before the target unit cost is determined.
false
T/F?
A new product's target cost is the projected short-term cost that will enable a firm to enter and remain in a market.
true
T/F?
If the projected cost of a new product is above the target cost, efforts are made to eliminate non-value-added costs to bring down the unit cost.
peak load pricing
the practice of setting prices highest when the quantity demanded for the product approaches capacity is called: