Cost Accounting Quiz Questions
Chapter 6-8, 17
- 1.
W
- A.
The variance is large in absolute or relative size.
- B.
The variance is small relative to the amount of spending involved.
- C.
The variance is small compared to the normal level of random fluctuation in the account.
- D.
The variance is common in occurrence.
Correct Answer
A. The variance is large in absolute or relative size.Explanation
The given answer suggests that the variance is large in either absolute or relative size. This means that there is a significant difference or deviation from the average or expected value. It implies that there is a significant fluctuation or variation in the data being analyzed, indicating a high level of dispersion.Rate this question:
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- 2.
The production volume variance
- A.
Only pertains to variable overhead costs.
- B.
Equals the spending variance minus the efficiency variance.
- C.
Pertains to both fixed and variable overhead costs.
- D.
Only pertains to fixed overhead costs.
- E.
Is not applicable in analysis of inventory costs.
Correct Answer
D. Only pertains to fixed overhead costs.Explanation
The production volume variance only pertains to fixed overhead costs. This variance measures the difference between the budgeted fixed overhead costs and the actual fixed overhead costs incurred, resulting from a change in the volume of production. It helps to analyze the impact of the production level on fixed overhead costs and provides insights into the efficiency of resource allocation. It is not applicable to variable overhead costs, as they are already accounted for in the efficiency variance.Rate this question:
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- 3.
T heoretical capacity is based on which of the following assumptions?
- A.
That absorption costing is used
- B.
Production will occur at peak efficiency all the time
- C.
That variable costing is used
- D.
Production will occur at peak capacity where feasible (e.g. except for maintenance and repairs)
Correct Answer
B. Production will occur at peak efficiency all the timeExplanation
The theoretical capacity is based on the assumption that production will occur at peak efficiency all the time. This means that the production process will operate at its maximum potential without any downtime or inefficiencies. It assumes that all resources are utilized effectively and there are no disruptions or constraints that would affect the production process. This assumption allows for the calculation of the maximum output that can be achieved under ideal conditions.Rate this question:
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- 4.
Budgets are advantageous because they
- A.
Compel planning that includes the implementation of plans, require organizing, and ensure controlling
- B.
Compel planning that includes the implementation of plans, provide performance criteria, and promote goodwill.
- C.
Ensure that the organization meets its goals.
- D.
Provide performance criteria, promote goodwill, and save money.
- E.
Compel planning that includes the implementation of plans, provide performance criteria, and promote communication and coordination within the organization.
Correct Answer
E. Compel planning that includes the implementation of plans, provide performance criteria, and promote communication and coordination within the organization.Explanation
Budgets are advantageous because they compel planning that includes the implementation of plans, provide performance criteria, and promote communication and coordination within the organization. By requiring planning and the implementation of plans, budgets ensure that the organization has a clear roadmap for achieving its goals. Additionally, by providing performance criteria, budgets allow for the measurement and evaluation of progress towards those goals. Finally, by promoting communication and coordination within the organization, budgets facilitate collaboration and alignment among different departments and teams.Rate this question:
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- 5.
A budget that is adjusted in accordance with changes in actual output is called
- A.
A static budget.
- B.
A balanced budget.
- C.
A flexible budget.
- D.
A trial balance budget.
- E.
A cost budget.
Correct Answer
C. A flexible budget.Explanation
A budget that is adjusted in accordance with changes in actual output is called a flexible budget. This type of budget allows for changes to be made based on the actual performance and output of a company, rather than sticking to a fixed plan. It provides more accurate financial information and allows for better decision-making as it takes into account the fluctuations in output levels.Rate this question:
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- 6.
Kaizen budgeting, adapted from the Japanese, provides that
- A.
Continuous budgeting methods are employed.
- B.
Activity costs are budgeted based on current practices, methods, and costs.
- C.
Target pricing is key to budget preparation.
- D.
A rolling budget is employed to keep a handle on management.
- E.
Continuous improvements are incorporated into the budget.
Correct Answer
E. Continuous improvements are incorporated into the budget.Explanation
Kaizen budgeting, adapted from the Japanese, emphasizes the incorporation of continuous improvements into the budget. This means that the budgeting process is not a one-time event, but rather an ongoing process that allows for adjustments and improvements as needed. By incorporating continuous improvements into the budget, organizations can strive for efficiency and effectiveness in their operations, leading to better financial performance. This approach aligns with the principles of Kaizen, which promote a culture of continuous improvement in all aspects of an organization.Rate this question:
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- 7.
The process in which a company's products or services are measured relative to the best possible levels of performance is known as
- A.
Standard measurement.
- B.
Budgeting.
- C.
Variance measurement.
- D.
Measuring the performance gap.
- E.
Benchmarking.
Correct Answer
E. Benchmarking.Explanation
Benchmarking is the process of comparing a company's products or services to the best possible levels of performance in the industry. It involves identifying the best practices and performance standards of other companies and using them as a reference point to improve one's own performance. This helps a company identify areas where it can make improvements and set targets for performance improvement. Therefore, benchmarking is the most appropriate term to describe the process of measuring a company's products or services relative to the best possible levels of performance.Rate this question:
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- 8.
Some financial variances show increases in operating income relative to a budgeted or allocated amount, and others show decreases in operating income. Respectively, these variances are
- A.
Fixed, variable
- B.
Budgeted, standard.
- C.
Standard, budgeted.
- D.
Unfavourable, favourable.
- E.
Favourable, unfavourable.
Correct Answer
E. Favourable, unfavourable.Explanation
Financial variances that show increases in operating income relative to a budgeted or allocated amount are considered favorable variances. This means that the actual operating income is higher than expected, which is a positive outcome. On the other hand, variances that show decreases in operating income are considered unfavorable variances. This indicates that the actual operating income is lower than expected, which is a negative outcome. Therefore, the correct answer is "favourable, unfavourable."Rate this question:
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- 9.
A production budget expressed in units is equal to
- A.
Last year's sales plus beginning finished goods inventory plus targeted ending finished goods inventory.
- B.
Budgeted sales less beginning finished goods inventory less targeted ending finished goods inventory.
- C.
Budgeted sales plus beginning finished goods inventory plus targeted ending finished goods inventory.
- D.
Budgeted sales less beginning finished goods inventory plus targeted ending finished goods inventory.
- E.
Budgeted sales plus beginning finished goods inventory less targeted ending finished goods inventory.
Correct Answer
D. Budgeted sales less beginning finished goods inventory plus targeted ending finished goods inventory.Explanation
A production budget expressed in units is equal to budgeted sales less beginning finished goods inventory plus targeted ending finished goods inventory. This is because the production budget represents the total number of units that need to be produced in order to meet the sales demand. The beginning finished goods inventory is subtracted from the budgeted sales because it represents the units that are already available and do not need to be produced. The targeted ending finished goods inventory is added to the budgeted sales because it represents the units that need to be produced in order to meet the desired ending inventory level. Therefore, the correct answer is budgeted sales less beginning finished goods inventory plus targeted ending finished goods inventory.Rate this question:
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- 10.
Clare's Bears manufactures stuffed bears. The company updates it annual budget every month in order to force management to think about the forthcoming 12 months and not just the current budget. This is an example of a
- A.
Moving budget.
- B.
Target budget.
- C.
Master budget.
- D.
Rolling budget.
- E.
Timing budget.
Correct Answer
D. Rolling budget.Explanation
A rolling budget is a type of budget that is continuously updated and revised over a specific period of time, typically on a monthly or quarterly basis. This allows the company to constantly adapt and make changes to their budget based on new information and changing circumstances. In this case, Clare's Bears updates their annual budget every month, indicating that they are using a rolling budget approach to ensure that management is consistently thinking about the upcoming 12 months rather than just the current budget period.Rate this question:
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- 11.
Activity-based budgeting is a strategy
- A.
That focuses on the cost of activities necessary to produce and sell products and services
- B.
That requires budgeting each functional organizational unit.
- C.
Does not require an understanding of value added activities.
- D.
Used to determine production targets.
- E.
That requires determining the budgetary slack for the activity being measured
Correct Answer
A. That focuses on the cost of activities necessary to produce and sell products and servicesExplanation
Activity-based budgeting is a strategy that focuses on the cost of activities necessary to produce and sell products and services. This means that instead of simply allocating a budget to each functional organizational unit, activity-based budgeting looks at the specific activities involved in the production and sale process and determines the cost associated with each activity. This allows for a more accurate and detailed budgeting process, as it takes into account the specific costs required for each activity. By focusing on the cost of activities, organizations can better understand and manage their expenses, leading to more efficient and effective budgeting.Rate this question:
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Jul 31, 2024Quiz Edited by
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Mar 07, 2010Quiz Created by
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