Question

True or False

1. _ F __ Absorption costing is used for internal use in decision making and is sometimes called direct costing.
2. _ T _ Manufacturing margin is the excess of variable selling and administrative expenses over sales.   
3. _ T _ For planning and control purposes, managers often compare planned with actual contribution margins.
4. _ T _ Market analysis determines the profit contributed by the market segments of a company and can be analyzed using sales, cost and expenses.
5. _ F _ In analyzing market segments, all companies prepare variable costing reports.   
6. _ T _ Budgets have an important role for organizations of all sizes and affects managerial functions like planning, directing and controlling.
7. _ T _ A continuous budgeting process is a variation of fiscal year budgeting that is used to maintain  a 12 month projection into the future.
8. _ F _ A static budget requires managers to estimate sales, production, and other operating data as though operations are being started for the first time.  
9. _ T _ Operating and financial budgets are an integrated part of the master budget process for a period of time.   
10. _ F _ A direct materials budget estimates the number of units that are required to be manufactured to meet budgeted sales and desired inventory levels.
11. _ T _ The cost of goods sold budget should include direct materials, direct labor, and factory overhead cost.              
12. _ F _ The principle of exceptions allows a company to focus on correcting differences between actual and standard performance.
13. _ T _ The standard setting process in an organization requires the effort of several departments.
14. _ T _ A favorable variance is when the actual is greater than the standard.     
15. __ T __ The total manufacturing cost variance is the difference between the total standard costs and the total actual cost for the units produced.      
16. _ T __ Variances should be reported to the manager responsible for the variance.
17. __T___ Analyzing factory overhead variances are different than direct material and direct labor because of the cost being both variable and fixed.  
18. _____ A nonfinancial performance measure will express performance similar to financial performance measures do.   
19. _____ One of the advantages of a decentralized organization is that decisions made by managers may affect the profits of the company.   
20. _____ The process of measuring and reporting operating results is responsibility accounting in a decentralized organization.
21. _____ A profit center, in a responsibility accounting system, the manager has responsibility and authority that affects revenues, costs, and operating assets.                                         
22. _____ The measurement used in investment centers is called profit margin.                                 
23. _____ Total variable cost remain the same in total dollar amount.   
24. _____ The break-even point is the point at which total revenues equal exactly total cost.
25. _____ Fixed unit cost remain constant as the level of activity changes.      

Answer 1

1. F   Absorption costing is used for internal use in decision making and is sometimes called direct costing.
2. T Manufacturing margin is the excess of variable selling and administrative expenses over sales.   
3. T For planning and control purposes, managers often compare planned with actual contribution margins.
4. T Market analysis determines the profit contributed by the market segments of a company and can be analyzed using sales, cost and expenses.
5. F In analyzing market segments, all companies prepare variable costing reports.   
6. T Budgets have an important role for organizations of all sizes and affects managerial functions like planning, directing and controlling.
7. T A continuous budgeting process is a variation of fiscal year budgeting that is used to maintain  a 12 month projection into the future.
8. F A static budget requires managers to estimate sales, production, and other operating data as though operations are being started for the first time.  
9. T Operating and financial budgets are an integrated part of the master budget process for a period of time.   
10. F A direct materials budget estimates the number of units that are required to be manufactured to meet budgeted sales and desired inventory levels.
11. T The cost of goods sold budget should include direct materials, direct labor, and factory overhead cost.              
12. F The principle of exceptions allows a company to focus on correcting differences between actual and standard performance.
13. T The standard setting process in an organization requires the effort of several departments.
14. T A favorable variance is when the actual is greater than the standard.     
15. T The total manufacturing cost variance is the difference between the total standard costs and the total actual cost for the units produced.      
16. T Variances should be reported to the manager responsible for the variance.
17. T Analyzing factory overhead variances are different than direct material and direct labor because of the cost being both variable and fixed.  
18. F A nonfinancial performance measure will express performance similar to financial performance measures do.   
19. F One of the advantages of a decentralized organization is that decisions made by managers may affect the profits of the company.   
20. T The process of measuring and reporting operating results is responsibility accounting in a decentralized organization.
21. T A profit center, in a responsibility accounting system, the manager has responsibility and authority that affects revenues, costs, and operating assets.                                         
22. T The measurement used in investment centers is called profit margin.                                 
23. F Total variable cost remain the same in total dollar amount.   
24. T The break-even point is the point at which total revenues equal exactly total cost.
25. T Fixed unit cost remain constant as the level of activity changes.