Managerial Accounting Creating Value in a Dynamic Business Environment 11th Edition By Hilton – Test Bank

True / False Questions

1. Flexible budgets reflect a company’s anticipated costs based on variations in activity levels.

TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01

Feedback True: Correct! Flexible budgets are based on a relevant range of activity levels.

Feedback False: Flexible budgets are based on a relevant range of activity levels.

2. The units of output are meaningful measures in multiproduct firms.

FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01

Feedback True: Units of output usually are not meaningful measures in multiproduct firms, because you must add numbers of unlike products.

Feedback False: Correct! Units of output usually are not meaningful measures in multiproduct firms, because you must add numbers of unlike products.

3. A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of $210,000.

FALSE

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 11-02

Feedback True: The amount of $210,000 is incorrect; it should be: $270,000, based on [($6 x 25,000) + $120,000].

Feedback False: Correct! The amount of $210,000 is incorrect; it should be: $270,000, based on [($6 x 25,000) + $120,000].

4. The formula flexible budget is more general than the columnar flexible budget, because the formula allows managers to compute budgeted overhead costs at any activity level.

TRUE

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 11-02

Feedback True: Correct! It is true that the formula flexible budget is more general than the columnar flexible budget.

Feedback False: The formula flexible budget is more general than the columnar flexible budget.

5. The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as actual hours times a predetermined (standard) overhead rate.

FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-03

Feedback True: Manufacturing overhead applied to Work-in-Process Inventory by a standard costing user would not be computed as actual hours times a predetermined (standard) overhead rate.

Feedback False: Correct! Manufacturing overhead applied to Work-in-Process Inventory by a standard costing user would not be computed as actual hours times a predetermined (standard) overhead rate.

6. Both normal- and standard-costing systems use a predetermined overhead rate.

TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-03

Feedback True: Correct! Both normal- and standard-costing systems use a predetermined overhead rate.

Feedback False: Both normal- and standard-costing systems use a predetermined overhead rate.

7. From a traditional perspective, dollars of raw material have been a popular activity measure in manufacturing firms.

FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04

Feedback True: Direct-labor time has traditionally been a popular activity measure in manufacturing firms.

Feedback False: Correct! Direct-labor time has traditionally been a popular activity measure in manufacturing firms.

8. The advantage of dollar measures as a basis for flexible overhead budgeting is that they are relatively stable over time.

FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04

Feedback True: Dollar measures typically are sub­ject to price-level changes and fluctuate more than physical measures. 

Feedback False: Correct! Dollar measures typically are sub­ject to price-level changes and fluctuate more than physical measures.  

9. Efficient or inefficient use of a specific component of variable overhead (e.g., electricity) will cause the firm to have a variable-overhead efficiency variance.

TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 11-05

Feedback True: Correct! It is true that efficient or inefficient use of a variable overhead component will cause the firm to have a variable-overhead efficiency variance.

Feedback False: It is true that efficient or inefficient use of a variable overhead component will cause the firm to have a variable-overhead efficiency variance.

10. The budget variance arises from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.

FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05

Feedback True: The budget variance does not arise from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.

Feedback False: Correct! The budget variance does not arise from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.