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ACCTG 102 Lecture Notes - Lecture 18: Variable Cost, Fixed Cost, Performance Measurement

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ochrehornet578
11 Sep 2020
School
GCC
Department
Accounting
Course
ACCTG 102
Professor
Gentile

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Document Summary

A flexible budget calculates different expenditure levels for variable costs, depending upon changes in actual revenue. The result is a budget that varies, depending on the activity levels experienced. You input the actual revenues or other activity measures into the flexible budget once an accounting period has been completed, and it generates a budget that is specific to the inputs. The budget is then compared to actual information for control purposes. This updates the variable costs in the flexible budget: enter the resulting flexible budget for the completed period into the accounting system for comparison to actual expenses. This approach varies from the more common static budget, which contains nothing but fixed amounts that do not vary with actual revenue levels. Budget versus actual reports under a flexible budget tend to yield variances that are much more relevant than those generated under a static budget, since both the budgeted and actual expenses are based on the same activity measure.

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Related Questions

1. Total assets turnover measures the ability of a firm to:

a. Generate profits on sales

b. Generates sales through the use of assets

C. Buy new Assets

D. Move inventory

E. Cover long term debt.

2.Managerial accounting :

a. focuses only on historical data

b. is govern by GAAP

c. focuses primarily on the needs of personnel within theorganization.

d. provides information for parties external to theorganization

e. focuses on the financial statement and other financialreports.

3. which of the following statement about similarities betweenprocess costing and job costing are true.

I. Both systems assign production costs to unit of output.

II. Both system require extensive knowledge of financialaccounting.

III. The flow of costs through the manaufacturing accopunts isessentially the same.

A. I only

B. I and III

C. II and III

D. III only

E. I,II, and III

4. The comprehensive set of budget that serves as a companyoverall financial plan si commonly known as:

A. Integrated budget

B. a Pro-forma budget

C. Master budget

D. a master budget

E. a rolling budget

5. A flexible budget:

A. classifies budget request by activity and estimates thebenefits arising from each activity.

B. presents a statement of expectations for a period of time butdoes not present a firm committment.

C. presents the plan for only one level of activity and does notadjust to changes in the level of activity.

D presents the plan for a range of activity so that the plan canbe adjust for changes in the activity level.

6. Which of the following is the correct method to calculate apredetermined overhead rate?

A. Budgeted total manufacturing cost budgeted amount of costdriver.

B. Budgeted overhead cost budgeted amount of cost driver

C. Budgeted amount of cost driver budgeted overhead cost

D. Actual overhead cost budgeted amount of cost driver

E. Actual overhead cost actual amount of cost driver.

7.Which of the following statements about joint-cost allocationis FALSE?

A. Joint cost allocation is useful in deciding whether tofurther process a product after split-off

B. Joint cost allocation is useful in making a profitdetermination about individual joint products

C. Joint cost allocation is helpful in inventory valuation

D. Joint cost allocation can be based on the number of unitsproduced.

E. Joint cost allocation can be accompanied by using differentmethods that focus on sale value and product worth.

8.The total production cost of a job is composed of:

A. Direct material and direct labor

B. direct material, direct labor, manufacturing overhead, andoutlays for selling costs.

C. direct material. direct labor, manufacturing overhead,andoutlays for both selling and administration costs.

D. direct materiaL, direct labor,and applied manufacturingoverhead

E. direct material, direct labor, and selling expenses.

9.What will cause the variable overhead efficiency variance?

A. Efficient or inefficient use of a specific component ofvariable overhead(e.g. electricity)

B. Full or partial utilization of major equipment resources

C. Production of unit in excess of the number of units sold.

D. Efficient or inefficient use of cost driver(e.g. machinehours) for variable overhead

E. Changes in the salary cost of manufacturing supervisors.

10. Which of the following is classified as an inventoryshortage cost?

A. Purchase order preparation

B. Production disruption

C. Lost sales and lost customers.

D. Spoilage

E. Production disruption, lost sales and lost customers.

Question 1

Billings Rail Company's sales for the next five months are asfollows:

February

$175,000
March

$160,000
April

$145,000
May

$135,000
June

$130,000


Collection history for the company indicates that 50% of sales arecollected in the month of the sale, 38% is collected in thefollowing month, and 12% of sales are uncollectible.
How much are total budgeted cash receipts for April?

A.

$123,800
B.

$154,300
C.

$72,500
D.

$133,300

2 points

Question 2

Budgeted sales (in units) for Falter Company are as follows:

September

50,000 units
October

60,000 units
November

55,000 units
December

80,000 units


The company wishes to have 20% of the next month's sales on hand atthe end of each month. How much is budgeted production forNovember?

A.

60,000 units
B.

61,000 units
C.

50,000 units
D.

71,000 units

2 points

Question 3

Tech Star Company must maintain a minimum cash balance of$25,000. At the beginning of June the company's cash balance was$17,000. Budgeted cash receipts for June are $150,000 and budgetedcash disbursements are $201,000. Budgeted net income for Julytotals $11,000. During July, how much will Tech Star Company needto borrow?

A.

$34,000
B.

$59,000
C.

$43,000
D.

$9,000

2 points

Question 4

A flexible budget takes into account the fact that whenproduction levels change

A.

total fixed costs remain the same.
B.

variable costs per unit changes.
C.

fixed costs per unit remain the same.
D.

None of the above is true.

2 points

Question 5

Good Stuff Restaurant expects to make the following inventorypurchases:

Month

Purchases
October

$80,000
November

100,000
December

160,000


During September, the restaurant purchased $72,000 of inventory.The restaurant typically pays for 25% of the inventory purchaseswithin the month of the purchase and 75% in the following month.Estimate the cash disbursements that will be made in November forpurchases related to inventory.

A.

$95,000
B.

$100,000
C.

$115,000
D.

$85,000

2 points

Question 6

The produce division of Boot Ship Nutrition had invested capitalof $800,000 last year. If the minimum required rate of return is15% and last year's residual income was $60,000, how much wasNOPAT?

A.

$60,000
B.

$120,000
C.

$400,000
D.

$180,000

2 points

Question 7

Fred's Fenders' cost of capital is 15%, and its required rate ofreturn is 12%. The company has noninterest-bearing currentliabilities of $50,000 and total assets of $350,000. Fred's NOPATis $100,000. How much is Fred's residual income?

A.

$55,000
B.

$45,000
C.

$52,000
D.

$64,000

2 points

Question 8

Dingo is one of the divisions of Alpha Corporation. Dingo'sinvested capital is $500,000. Last year, Dingo recorded NOPAT of$80,000 on sales of $360,000. Which one of the following correctlycalculates return on investment using the two components of returnon investment?

A.

$80,000 ÷ $360,000
B.

1.39 × 11.5
C.

22.22% × 0.72
D.

$80,000 ÷ ($500,000 - $80,000)

2 points

Question 9

Residual income is NOPAT with an adjustment for

A.

standard cost variances.
B.

profit required for the level of investment in the investmentcenter.
C.

taxes and depreciation.
D.

accounting distortions.

2 points

Question 10

The income that is used in the calculation of return oninvestment is usually

A.

EBIT (earnings before interest and taxes).
B.

net income as defined by GAAP.
C.

net income plus depreciation expense.
D.

NOPAT (net operating profit after taxes).