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TEST BANK for Managerial Accounting 17th
Edition by Ray Garrison | All Chapters (1-16)
| Complete Questions & Answers | Verified &
Updated 2025
All of the following are reasons for revenue variances EXCEPT ________. - CORRECT ANSWERS--a change in input prices The difference between the actual cost and budgeted cost at the actual level of activity is called a(n) ________. - CORRECT ANSWERS--spending variance The difference between the actual total revenue and budgeted total revenue at the actual level of activity is called a(n) ________. - CORRECT ANSWERS--Revenue variance Which of the following scenarios demonstrates the leverage effect on net operating income due to the existence of fixed costs? - CORRECT ANSWERS--A 25% increase in sales resulting in a 30% increase in net operating income. Correct Paradise Company's planning budget for 10,000 units showed sales of $500,000. The flexible budget for 12,000 units showed sales of $600,000. What is the variance of $100,000 called if this variance was due only to an increase in unit sales? multiple choice - CORRECT ANSWERS--Activity Variance Which of the following is NOT a column on a flexible budget performance report? - CORRECT ANSWERS--Net Operating Income An unfavorable variance of $5,000 in cost of goods sold is determined by comparing the actual results (10,000 units) and the flexible budget (10,000 units). What type of variance is described? - CORRECT ANSWERS--spending variance An unfavorable variance of $5,000 in sales is determined by comparing the flexible budget (9,000 units) and the planning budget (10,000 units). What type of variance is described? - CORRECT ANSWERS--activity variance All of the following are reasons for preparing a flexible budget with multiple cost drivers EXCEPT ________. - CORRECT ANSWERS--it eliminates the need for performing variance analysis Correct Which of the following is true when a company determines that its costs should be explained by more than one cost driver? - CORRECT ANSWERS--A flexible budget
performance report that is based on more than one cost driver will be more accurate than a flexible budget performance report that is based on just one cost driver. Correct Hamiter Framing's cost formula for its supplies cost is $1,640 per month plus $9 per frame. For the month of August, the company planned for activity of 572 frames, but the actual level of activity was 573 frames. The actual supplies cost for the month was $7,080. The supplies cost in the planning budget for August would be closest to: - CORRECT ANSWERS--6, Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,530 patient-visits and the actual level of activity was 1,490 patient-visits. The cost formula for administrative expenses is $4.00 per patient- visit plus $15,300 per month. The actual administrative expense was $19,810. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was: - CORRECT ANSWERS--$1,450 F Standerd Quantity Allowed - CORRECT ANSWERS--in the case of labor and overhead is the amount of materials (or labor) that should have been used to complete the output of the period Material Quantity Variance - CORRECT ANSWERS--SP(AQ-SQ) Material Price Variance - CORRECT ANSWERS--diff of total price paid and total price should have paid for the same amount the standerd rate per hour for direct labor should include all the cost of direct labor workers, uncluding - CORRECT ANSWERS--hourly wage rate, fringe benefits, and employment taxes the standard quantity per unit for direct materials is the amount of material that should go into each finished unit of product. the standard quantity should reflect - CORRECT ANSWERS--- engineered (bill of materials) requirements.
- expected spoilage of raw materials.
- unavoidable waste of materials in the production process.
- materials in expected scrapped units (rejects) Variable overhead rate variance - CORRECT ANSWERS--Actual hours × ( Actual rate - Standard rate) Variable overhead efficiency variance - CORRECT ANSWERS--Standard rate (Actual hours - standard hours) Fixed overhead budget variance - CORRECT ANSWERS--Actual fixed overhead - budgeted fixed overhead
What are the three responsibility centers? - CORRECT ANSWERS--Const, Profit, Investment Profit Center - CORRECT ANSWERS--A segment whose manager has control over both costs and revenues, but no control over investment funds. Investment Center - CORRECT ANSWERS--A segment whose manager has control over costs, revenues, and investments in operating assets Return On investment Formula - CORRECT ANSWERS--- Net Operating Income / Average Operating Assets
- NOI (Income before interest and taxes EBIT)
- Average operating assets (Cash, accounts receivable, inventory, plant and equipment, and other productive assets) Average Operating assets - CORRECT ANSWERS--(beginning assets + ending assets) / 2 Net Book Value - CORRECT ANSWERS--cost - accumulated depreciation Margin formula - CORRECT ANSWERS--Net Operating Income / Sales Turnover formula - CORRECT ANSWERS--(Sales / Average Operating Assets) ROI formula - CORRECT ANSWERS--(net operating income/average operating assets) times (Sales / Average Operating Assets) or Margin x Turnover Residual Income - CORRECT ANSWERS--net operating income above some minimum return on operating assets. Residual Income formula - CORRECT ANSWERS--Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return). aka Net Operating Income - Minimum rate of return Minimum required return - CORRECT ANSWERS--Average operating assets x Minimum required rate of return
In a decentralized organization - CORRECT ANSWERS---lower level managers are trained for high positions -top management can concentrate on issues such as overall strategy
- changes in the operating environment can be responded to quickly Which of the following statements is incorrect regarding responsibility accounting? - CORRECT ANSWERS--Responsibility accounting refers to the process of evaluating top management on the decisions made by lower-level managers. Which of the following evaluation measures are used for investment center managers only—not for cost or profit center managers? - CORRECT ANSWERS--- residual income
- return on investment EBIT is another term for ______. - CORRECT ANSWERS--net operating income Valid criticisms of evaluating performance based on return on investment (ROI) include managers may ______. - CORRECT ANSWERS--- reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI
- take actions that increase ROI in the short-run at the expense of long-term performance -be put in charge of a business segment that includes committed costs over which a manager has no control Using net book value (instead of gross cost) to calculate average operating assets ______. - CORRECT ANSWERS--increases ROI overtime Which of the following statements is correct?
- A manager might reject a proposal using ROI that the manager would accept using residual income.
- A project that is not acceptable using residual income calculations may be acceptable when ROI is calculated.
- Managers will be more likely to pursue projects that will benefit the entire company when being evaluated on ROI instead of residual income. - CORRECT ANSWERS--A manager might reject a proposal using ROI that the manager would accept using residual income. True or false: Adams, Inc. has found that their managers are reluctant to replace old equipment with new, updated equipment. To stop this practice, Adams should compute ROI using assets' net book values. True false question. - CORRECT ANSWERS--False When managers are evaluated on residual income, rather than on return on investment (ROI), they will be ______ likely to pursue projects that will benefit the entire company. - CORRECT ANSWERS—more
What ratios are part of the ROI formula? - CORRECT ANSWERS--NOI/sales & sales/average operating assets Given sales of $250,000, NOI of $25,000 & Average Operating Assets of $125,000. - CORRECT ANSWERS--Margin= $25,000/$200,000 (NOI/sales) = 10% Turnover= $250,000/125,000 (sales/average operating assets) = 2. In order to increase margin, a company must (1) sales, and/or (2) operating expenses and/or (3) selling price. (increase/decrease) - CORRECT ANSWERS--1) increase
- decrease
- increase When considering ROI, excessive operating expenses is always a greater concern to managers than excessive operating assets. (true/false) - CORRECT ANSWERS--False Given a margin of 12%, sales of $150,000, & average operating assets of $90,000, the ROI is ___% - CORRECT ANSWERS--12% x $150,000/$90,000 = 20% ROI can be calculated as: - CORRECT ANSWERS--margin x turnover & net operating income/average operating assets when making a decision, only relevant items are included in the analysis of the alternatives when using: - CORRECT ANSWERS--the differential cost approach only A cost that has already been incurred & cannot be avoided regardless of what a manager decides to do is referred to as a(n) _____ cost. - CORRECT ANSWERS--sunk When making a decision to either buy a movie ticket or rent a DVD, the cost of the movie ticket is an example of a(n) ______ cost - CORRECT ANSWERS--incremental & avoidable when a constraint exists, companies need to focus on maximizing - CORRECT ANSWERS--contribution margin per unit of constraint The financial statements of Carrier Office Furniture Company include the following items: 2019 2018 Cash $52,500 $50, Short-term Investments 29,000 12, Net Accounts Receivable 99,000 106, Merchandise Inventory 161,000 152, Total Assets 527,000 544, Total Current Liabilities 273,000 285, Long-term Note Payable 55,000 53,
What is working capital for 2019? A. $92, B. $68, C. $199, D. $39,500 - CORRECT ANSWERS--B. $68, The financial statements for Uptown Service Company include the following items: 2019 2018 Cash $50,500 $40, Short-term Investments 32,000 11, Net Accounts Receivable 52,000 55, Merchandise Inventory 157,000 49, Total Assets 531,000 554, Accounts Payable 124,500 124, Salaries Payable 16,000 18, Long-term Note Payable 56,000 52, Compute working capital for 2019. A. $135, B. $151, C. $95, D. $31,000 - CORRECT ANSWERS--B. $151, Mercer, Inc. provides the following data for 2019: Net sales revenue 595, Cost of Goods Sold 370, The gross profit as a percentage of net sales is ________. (Round your answer to two decimal places.) A. 39.16% B. 35.89% C. 37.82% D. 62.18% - CORRECT ANSWERS--C. 37.82% Reliable Moving Company reported the following amounts on its balance sheet as of December 31, 2019 and December 31, 2018: 2019 2018 Cash and Receivables $75,000 $135, Merchandise Inventory 155,000 220, Property, Plant and Equipment, net 770,000 770,
C. horizontal analysis D. financial statement analysis - CORRECT ANSWERS--D. financial statement analysis Nurix, Inc. is a business consulting firm. During the month of February, Nurix earned $55,600 of revenues by providing services to 47 clients. Operating costs for February were $8,500 and non-operating costs were $6,000. What is the unit cost per service? (Round your answer to the nearest cent.) A. $127. B. $1,182. C. $308. D. $180.85 - CORRECT ANSWERS--D. $180. Samson, Inc. reported the following information for the year: Service revenue $55, Operating expenses 21, Net income 34, Number of Services Provided for the Year 10, How much was the unit cost per service? (Round your answer to the nearest cent.) A. $5. B. $7. C. $ D. $3.24 - CORRECT ANSWERS--C. $ Which of the following correctly describes Just-in-Time (JIT) Management? A. It is a cost management approach that focuses on maintaining large finished goods inventory levels. B. It is a production approach that maintains surplus goods at each stage of manufacture. C. It is an inventory approach that stockpiles raw materials to protect against supply interruptions. D. It helps managers cut costs by speeding the transformation of raw materials into finished products. - CORRECT ANSWERS--D. It helps managers cut costs by speeding the transformation of raw materials into finished products. One of the primary activities of Perez, Inc. is to purchase hats from Toppers, Inc. in Texas and sell them to its customers in New York for a profit. It is likely that Perez is a ________. A. hybrid company B. manufacturing company C. merchandising company
D. service company - CORRECT ANSWERS--C. merchandising company Artisan Inspiration, Inc. is a merchandiser of stone ornaments. The company sold 6, units during the year. The company has provided the following information: Sales revenue $579, Purchases (excluding Freight In) 303, Selling and Administrative Expenses 66, Freight in 14, Beginning Merchandise Inventory 45, Ending Merchandise Inventory 42, What is the operating income for the year? (Round your answer to the nearest whole dollar.) A. $320, B. $259, C. $193, D. $513,000 - CORRECT ANSWERS--C. $193, A corporation used $34,000 of direct materials. It incurred $73,000 in direct labor costs and $112,500 in manufacturing overhead costs during the period. What is the cost of goods manufactured if the beginning and ending Work-in-Process Inventories were $28,000 and $22,000 respectively? A. $213, B. $219, C. $247, D. $225,500 - CORRECT ANSWERS--D. $225, Payton Corporation provided the following information for the year: Beginning Balance-Work-in-Process Inventory $28, Ending Balance-Work-in-Process Inventory 56, Beginning Balance-Direct Materials 84, Ending Balance-Direct Materials 62, Purchases-Direct Materials 358, Direct Labor 471, Indirect Labor 20,
cost. The work by engineers is charged to jobs at a rate of $31 per staff labor hour. A recent job for a client used 85 staff labor hours. How much was the total job cost? A. 43 B. $2, C. $3, D. $1,318 - CORRECT ANSWERS--C. $3, Underallocated overhead occurs when ________. A. estimated overhead costs are greater than actual overhead costs B. allocated overhead costs are less than actual overhead costs C. estimated overhead costs are greater than budgeted overhead costs D. actual overhead costs are less than allocated overhead costs - CORRECT ANSWERS--B. allocated overhead costs are less than actual overhead costs Neptune Fabrication Plant has provided you with the following information: Total manufacturing overhead costs estimated at the beginning of the year $250, Total direct labor costs estimated at the beginning of the year $120, Total direct labor hours estimated at the beginning of the year 5,000 direct labor hours Actual manufacturing overhead costs for the year $244, Actual direct labor costs for the year $134, Actual direct labor hours for the year 4,700 direct labor hours The company bases its manufacturing overhead allocation on direct labor hours. What was the unadjusted ending balance in the Manufacturing Overhead account? A. $9,000 credit balance B. $35,167 debit balance C. $9,000 debit balance D. $35,167 credit balance - CORRECT ANSWERS--C. $9,000 debit balance On January 1, Biden, Inc.'s Work-in-Process Inventory account had a balance of $30,300. During the year, $58,500 of direct materials was placed into production. Manufacturing wages incurred amounted to $84,000, of which $64,500 were for direct labor. Manufacturing overhead is allocated on the basis of 120% of direct labor cost. Actual manufacturing overhead was $90,500. Jobs costing $220,500 were completed during the year. What is the December 31 balance of Work-in-Process Inventory?
A. $30,
B. $230,
C. $10,
D. $153,300 - CORRECT ANSWERS--C. $10,
Caltran, Inc. completed manufacturing Job 445. It included $310 of direct materials cost, $1,220 of direct labor cost, and $560 of allocated manufacturing overhead. Which of the following is the correct journal entry needed to record the completed job? A. Work-in-Process Inventory 2, Finished Goods Inventory 2, B. Work-in-Process Inventory 1, Cost of Goods Sold 1, C. Finished Goods Inventory 2, Work-in-Process Inventory 2, D. Finished Goods Inventory 2, Materials Inventory 2,090 - CORRECT ANSWERS--C. Finished Goods Inventory 2, Work-in-Process Inventory 2, Altima, Inc. finished Job A40 on the last working day of the year. It utilized $360 of direct materials and $3,370 of direct labor. Altima uses a predetermined overhead allocation rate based on direct labor costs, which has been fixed at 40%. The entry to record the completion of the job should involve a ________. A. debit to Work-in-Process Inventory $5,078 and a credit to Finished Goods Inventory $5, B. debit to Cost of Goods Sold $5,078 and a credit to Finished Goods Inventory $5, C. debit to Finished Goods Inventory $5,078 and a credit to Materials Inventory $5, D. debit to Finished Goods Inventory $5,078 and a credit to Work-in-Process Inventory $5,078 - CORRECT ANSWERS--D. debit to Finished Goods Inventory $5,078 and a credit to Work-in-Process Inventory $5, Which of the following is a reason why a job order costing system is appropriate for a custom furniture manufacturer? A. The direct costs incurred for each job are the same, only indirect costs vary. B. Custom furniture manufacturers produce large quantities of similar products. C. The cost incurred for each job will differ as per the order specifications. D. The raw materials used have already been accounted for using process costing. - CORRECT ANSWERS--C. The cost incurred for each job will differ as per the order specifications. The entry to record the purchase of raw materials on account would include a ________. A. credit to the Work-in-Process Inventory account
