Questions and Answers
What is managerial accounting?
What is a cost driver?
A factor that causes variations in a cost
The costs of direct materials are classified as?
What formula is used to apply manufacturing overhead to jobs?
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What type of variance occurs when actual labor hours worked exceed standard labor hours allowed?
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What would a favorable materials price variance coupled with an unfavorable material usage variance likely result from?
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What is a flexible budget?
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Which budgets are prepared before the sales budget?
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What is contribution margin?
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What year-end journal entry could Ivory Company make to dispose of $4,150 of overapplied manufacturing overhead cost?
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When the level of activity increases within the relevant range, how do the levels change?
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Which of the following is not a benefit of budgeting?
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What is return on investment?
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Process costing would be appropriate for which of the following?
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Give an example of a period cost.
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Which of the following costs are always irrelevant in decision making?
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Where is the break-even point located on a cost-volume-profit graph?
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Study Notes
Managerial Accounting
- Focuses primarily on future projections and decision-making processes.
Cost Driver
- Defined as a factor causing variations in costs incurred by a business.
Direct Materials Costs
- Classified as no conversion costs, considered manufacturing and prime costs.
Manufacturing Overhead Application
- Calculated using the predetermined overhead rate multiplied by actual units of the allocation base for a specific job.
Labor Variance
- An unfavorable labor efficiency variance occurs when actual labor hours exceed standard labor hours allowed.
Materials Price and Usage Variance
- A favorable materials price variance combined with an unfavorable material usage variance often results from purchasing low-quality materials.
Flexible Budget
- Updated to represent the actual activity level during a specific period.
Sales Budget Preparation
- No manufacturing overhead or cash budgets are prepared before the sales budget.
Contribution Margin
- Represents the surplus of revenues after deducting all variable costs.
Job-Order Costing System Journal Entry
- To close out $4,150 of overapplied manufacturing overhead, a journal entry involves debiting Manufacturing Overhead and crediting Cost of Goods Sold by $4,150.
Activity Level Changes
- With increased activity within the relevant range: fixed costs remain the same, variable costs increase, and total costs increase.
Budgeting Benefits
- Budgeting does not ensure compliance with Generally Accepted Accounting Principles (GAAP).
Return on Investment (ROI)
- Calculated by dividing net operating income by average operating assets.
Process Costing
- Not suitable for custom furniture manufacturing, which relies on job-order costing.
Period Cost Example
- Rent on a headquarters building is classified as a period cost.
Irrelevant Costs in Decision Making
- Sunk costs are always considered irrelevant, as they cannot be recovered.
Cost-Volume-Profit Graph
- The break-even point is identified at the intersection of total revenue and total expenses lines.
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Description
This quiz covers essential concepts of Managerial Accounting, focusing on cost determinants, budget preparation, and variances. It includes topics such as direct materials costs, manufacturing overhead, and labor efficiency. Test your understanding of how these elements contribute to effective decision-making in a business context.
