MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Cost Accounting
16th Edition
ISBN: 9780134476384
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 7, Problem 7.17MCQ
All of the following statements regarding standards are accurate except:
- a. Standards allow management to budget at a per-unit level.
- b. Ideal standards account for a minimal amount of normal spoilage.
- c. Participative standards usually take longer to implement than authoritative standards.
- d. Currently attainable standards take into account the level of training available to employees.
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All of the following statements regarding standards are accurate except:
a. Standards allow management to budget at a per-unit level.
b. Ideal standards account for a minimal amount of normal spoilage.
c. Participative standards usually take longer to implement than authoritative standards.
d. Currently attainable standards take into account the level of training available to employees.
Which of the following statements about budgets is FALSE ?
Budgets help the company manage risks .
Incurring actual costs at a level in excess of the amount in the flexible budget for the actual level of operation always results in an unfavorable variance
Budgets help move the company from an informal reactive style to a more formal proactive style of management
Incurring actual costs at a level in excess of the amount planned in the original static budget always results in a favorable variance .
Budgets help establish responsibility and evaluate managers performance .
Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?
Department managers' performances should not be evaluated based on actual results to budgeted results.
Department managers should be credited for favorable variances even if they are beyond their control.
Department managers should be held accountable for all variances from budgets for their departments.
Department managers should only be held accountable for controllable variances for their departments.
Chapter 7 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Cost Accounting
Ch. 7 - What is the relationship between management by...Ch. 7 - What are two possible sources of information a...Ch. 7 - Distinguish between a favorable variance and an...Ch. 7 - What is the key difference between a static budget...Ch. 7 - Why might managers find a flexible-budget analysis...Ch. 7 - Describe the steps in developing a flexible...Ch. 7 - List four reasons for using standard costs.Ch. 7 - How might a manager gain insight into the causes...Ch. 7 - List three causes of a favorable direct materials...Ch. 7 - Describe three reasons for an unfavorable direct...
Ch. 7 - How does variance analysis help in continuous...Ch. 7 - Why might an analyst examining variances in the...Ch. 7 - Prob. 7.13QCh. 7 - When inputs are substitutable, how can the direct...Ch. 7 - Benchmarking against other companies enables a...Ch. 7 - Metal Shelf Companys standard cost for raw...Ch. 7 - All of the following statements regarding...Ch. 7 - Amalgamated Manipulation Manufacturings (AMM)...Ch. 7 - Atlantic Company has a manufacturing facility in...Ch. 7 - Basix Inc. calculates direct manufacturing labor...Ch. 7 - Flexible budget. Sweeney Enterprises manufactures...Ch. 7 - Flexible budget. Bryant Companys budgeted prices...Ch. 7 - Flexible-budget preparation and analysis. Bank...Ch. 7 - Flexible budget, working backward. The Clarkson...Ch. 7 - Flexible-budget and sales volume variances....Ch. 7 - Price and efficiency variances. Sunshine Foods...Ch. 7 - Materials and manufacturing labor variances....Ch. 7 - Direct materials and direct manufacturing labor...Ch. 7 - Price and efficiency variances, journal entries....Ch. 7 - Materials and manufacturing labor variances,...Ch. 7 - Journal entries and T-accounts (continuation of...Ch. 7 - Price and efficiency variances, benchmarking....Ch. 7 - Static and flexible budgets, service sector....Ch. 7 - Flexible budget, direct materials, and direct...Ch. 7 - Variance analysis, nonmanufacturing setting. Joyce...Ch. 7 - Comprehensive variance analysis review. Ellis...Ch. 7 - Possible causes for price and efficiency...Ch. 7 - Material-cost variances, use of variances for...Ch. 7 - Direct manufacturing labor and direct materials...Ch. 7 - Direct materials efficiency, mix, and yield...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Use of materials and manufacturing labor variances...Ch. 7 - Direct manufacturing labor variances: price,...Ch. 7 - Direct-cost and selling price variances. MicroDisk...Ch. 7 - Variances in the service sector. Derek Wilson...Ch. 7 - Prob. 7.47P
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- Information technology has made it easier for managers to perform all of the following tasks except a. preparing performance reports that identify variances between actual and budgeted revenues and costs. b. combining individual units’ budgets into the companywide budget. c. sensitivity analyses. d. removing budgetary slack from the budget.arrow_forwardWhich of the following is not a reason standard costs are separated into two components? a.Identifying variances determines which manager must find a solution to major discrepancies. b.If a negative variance is overshadowed by a favorable variance, managers may overlook potential corrections. c.The price and quantity variances need to be identified separately to correct the actual major differences. d.Variances bring attention to discrepancies in the budget and require managers to revise budgets closer to actual results.arrow_forwardWhich of the following statements is false? Standard costs (e.g., how much should be paid for each unit of input) are benchmarks for measuring performance. Managers should investigate only unfavorable variances. Variance analysis enhances responsibility accounting. A variance is the difference between the budgeted amount and actual amount.arrow_forward
- Which of the following statements is true of performance reporting? A. Responsibility reports should focus on the person responsible for unfavorable variances, rather than information. B. Every variance, regardless of magnitude, must be investigated by the managers. C. Managers should not be held accountable for uncontrollable variances. D. Only unfavorable variances in the reports should be explained.arrow_forwardWhich of the following statements is true? I. To provide a basis for comparison of actual performance is one primary purpose of budgeting. II. Ineffective budgets and/or control systems are characterized by the use of budgets as a planning tool only and disregarding them for control purposes III. For better management acceptance, the flow of data to be used for budgeting should begin with Lower levels of management IV. Actual results need not be compared with plan, since the process ends after budget is approved.arrow_forwardhich of the following statements is true? A budget reconciliation report shows the difference between actual profit and budgeted profit and does not show the other variances. Comparing the flexible budget to the as-if budget isolates a change in input price (e.g. budgeted input price vs. actual input price). Sales quantity (budgeted sales volume vs. actual sales volume) is the only item which differs between the master budget and the flexible budget. Activity-based costing is not used to evaluate customer profitability.arrow_forward
- Which of the following statements is false? (You may select more than one answer.)a. A flexible budget is used for control purposes and a static budget is used for planning purposes.b. A flexible budget is prepared at the end of the period and a static budget is prepared at the beginning of the period.c. A flexible budget is not useful for controlling variable costs.d. A static budget provides budgeted estimates for one level of activity.arrow_forwardDiscuss the factors that are likely to cause managers to submit budget estimates of sales and costs that do not represent their best estimate or expectations of what will actually occur and Suggest, as a budget accountant, what procedures you would advise in order to minimize the likelihood of such biased estimate arising.arrow_forwardIn gross profit analysis, if the cost variance is zero, such variance indicates that a. Manufacturing management was able to control production cost below budgeted costs b. Manufacturing management was unable to keep production costs at budgeted costs. c. Manufacturing management was able to control production cost at budgeted costs. d. Manufacturing management was not able to control production at budgeted costs but purchasing was able to keep at budgeted price.arrow_forward
- A budget is most likely to be effective if it is not used to evaluate a manager's performance. employees and managers at the lower levels do not get involved in the budgeting process. it is used to assess blame when things do not occur according to plans. it has top management support.arrow_forwardWhich of the following is NOT a reason for an unfavorable direct materials quantity variance ? Purchasing of inferior raw materials Malfunctioning equipment Increased cost per unit of direct materials Employees using more material than budgetedarrow_forwardWhich of the following statements is true? I. To provide a basis for comparison of actual performance is one primary purpose of budgeting. II. Ineffective budgets and/or control systems are characterized by the use of budgets as a planning tool only and disregarding them for control purposes III. For better management acceptance, the flow of data to be used for budgeting should begin with Lower levels of management IV. Actual results need not be compared with plan, since the process ends after budget is approved. a. I and II b. II and III c. III and IV d. None of the abovearrow_forward
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