Flashcards in Module 22 Deck (39)
A responsibility accounting system is a system that assigns responsibility for various accounting functions. T or F
A revenue center is a organizational unit whose manager is responsible for the amount of revenues generated by the unit. T or F
An investment center manager would be responsible only for revenues, costs, and profits.
T or F
Both investment center and cost center managers are responsible for managing:
B. Net income
D. Contribution margins
Cost centers are responsible for managing costs, and investment centers are responsible for managing revenues, costs, and asset investments
Which of the following departments would not be classified as a profit center?
A. The accounting department of a large corporation
B. The automotive division of a large corporation
C. The hardware department of a department store
D. The men's shoe department of a department store
The accounting department of a large corporation
Which of the following is not an example of a responsibility center?
A. A cost center
B. A revenue center
C. An activity center
D. An investment center
An activity center
Which of the following about the manager of a profit center is true?
A. Does not control revenues
B. Does not control expenses
C. Does not control investments
D. Only controls revenues
Does not control investments
The manager of an investment center is responsible for all of the following except:
A. Decisions regarding corporate overhead
B. Decisions regarding revenues
C. Decisions to invest in assets
D. Decision regarding costs
Decisions regarding corporate overhead
In what way does a cost center differ from either an investment center or a profit center?
A. Cost centers are a much less common component of current business organizations, given the increased emphasis on value chain analysis.
B. A cost center is always smaller than either an investment center or a profit center.
C. A cost center recognizes neither revenues nor computes income.
D. Both A and B are correct
.A cost center recognizes neither revenues nor computes income
Which of the following facets of a responsibility accounting system is most likely to lead employees to distrust the entire budgeting and performance evaluation system?
A. Tight standards
B. Well-defined standards
C. Budget participation
D. Static qualifiers
Structuring performance reports and addressing them to individuals as group members of an organization in a manner that emphasizes factors that can be controlled by them is accomplished by using which of the following?
A. Absorption costing
B. Value chain analysis
C. Responsibility accounting
D. Relational concepts
When using responsibility accounting, non-controllable costs should be excluded from which reports?
A. Discretionary cost reports
B. Performance reports
C. Financial statements
D. Tax filings
The approach toward management that considers the absence of significant differences between planned and actual results as an indication that everything is proceeding as planned is known as:
A. The control principal
B. The Peter principal
C. Budget constraints
D. Management by exception
Management by exception
A static budget is a budget prepared before the beginning of the budget period based on expected level of operations; whereas, a flexible budget is prepared after the fact based on actual operations. T or F
If the actual level of activity for a period is greater than the level budgeted before the period began, a performance report of operating costs based on a flexible budget will likely show more favorable than unfavorable variances. T or F
A standard cost of a product is the amount that it should cost to produce a given product as determined by the International Cost Standards organization. T or F
A. Indicate what it should cost to produce one unit of a product under efficient operating conditions
B. Should be used in planning and controlling all costs
C. Should be developed from average historical costs
D. Are determined by regulators
Indicate what it should cost to produce one unit of a product under efficient operating conditions
A flexible budget variance for a manufacturing cost is computed as the difference between:
A. Flexible budget costs and static budget costs
B. Actual costs and flexible budget costs
C. Departmental costs and cost center costs
D. Flexible budget costs and original budget costs
Actual costs and flexible budget costs
Budgets based on the actual level of output, rather than the output originally budgeted, are called:
Unfavorable materials quantity variances may be partially explained by favorable materials price variances. T or F
A labor efficiency variance results from the inefficient use of labor quantity to produce a given amount of product or service. T or F
An overhead efficiency variance can be caused by using more than the allowed quantity of the various components of variable overhead. T or F
By using time and motion studies, it is possible to determine how long it takes to perform an activity. This information is often used to formulate:
A. Standard allowances for labor hours
B. Standard labor prices
C. Standard allowances for materials
D. Standard material prices
Standard allowances for labor hours
Assume that the standard cost to make one unit of product includes 10 units of raw materials at a price of $3 per unit. In July, 34,000 units of raw materials were purchased for $100,800, and 20,800 units of raw materials were used to produce 2,000 units of finished product. What is the materials quantity variance?
A. $2,400 (U) Rationale: ([10 × 2,000] – 20,800) × $3 = $2,400 (U)
B. $ 800 (U)
C. $1,200 (F)
D. $1,200 (U)
The difference between an actual cost number and the related standard cost number is:
A. A discretionary cost
B. An inflation adjustment
C. A standard cost variance
D. Budget overrun
A standard cost variance
The objective of standard cost variance analysis is:
A. To identify standard cost variances and to explain the reasons for their occurrences
B. To explore the reason or reasons for variation in sales prices of products offered in the company’s main line of business
C. To identify the standard deviation in budgeted numbers over a period of time
D. To purge cost data of the effects of inflation
To identify standard cost variances and to explain the reasons for their occurrences
Which term describes difference between the actual price of inputs and the standard price of inputs?
A. Price variance
B. Standard cost variance
C. Inflation index adjustment
D. Materials price index
Which of these factors is not a possible cause for a favorable materials price variance?
A. Quantity discounts
B. Purchasing higher quality materials than required
C. Purchasing from a distress seller
D. Purchasing a discontinued item
Purchasing higher quality materials than required
Which of the following factors describes a possible cause for an unfavorable materials price variance?
A. Last minute purchases
B. Vendors flooding the marketplace with their products
C. Purchasing low quality materials
D. Making a long-term commitment with one vendor for a specific raw material
Last minute purchases