MGMT-221 - about relevant cost and master budget PDF

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MGMT 221- Midterm ExamMULTIPLE CHOICEWhich of the following statements is correct? In variable costing income statement, sales revenue is typically higher than in absorption costing income statement When production is not equal to sales, income under absorption costing differs in treatment (product ...

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MGMT2 2 1 . 3 2 1 -Mi dt e r mEx a m MUL TI PLECHOI CE Wh i c ho f t h ef o l l o wi n gs t a t e me n t si sc o r r e c t ? I nv a r i a b l ec o s t i n gi n c o mes t a t e me n t , s a l e sr e v e n u ei st y p i c a l l yh i g h e rt h a ni na b s o r p t i o nc o s t i n gi n c o mes t a t e me n t Wh e npr o duc t i oni snot e qua l t os a l e s , i nc omeund e ra bs or p t i o nc os t i ngdi ffe r si nt r e a t me n t( p r o duc tc o s ta ndpe r i o dc o s t )of t hefix e do v e r he a dc o s tund e rt het woc o s t i ngme t hods I nav a r i a b l ec o s t i n gs y s t e m, fi x e do v e r h e a dc o s t i si n c l u d e da sp a r t o f t h ec o s t o f i n v e n t o r y I na na b s o r p t i o nc o s t i n gs y s t e m, fi x e do v e r h e a dc o s t i st r e a t e da sap e r i o dc o s t Wh i c ho f t h ef o l l o wi n gs t a t e me n t si st r u e ? De p r e c i a t i o ne x p e n s ei sa l wa y sap r o d u c t c o s t De p r e c i a t i o ne x p e n s ei sa l wa y sap e r i o dc o s t Se l l i nga nda dmi n i s t r a t i v ec os t s ,whe t h e rv a r i a bl eorfi x e d,i sa l wa y st r e a t e da spe r i odc os t sun de rbo t ha bs or pt i o na nd v a r i a bl ec os t i ngs y s t e ms I n c o meu n d e r a b s o r p t i o nc o s t i n gi sa l wa y sg r e a t e rt h a ni n c o meu n d e rv a r i a b l ec o s t i n g I f p r o d u c t i o ni sl e s st h a ns a l e s( i nu n i t s ) , t h e na b s o r p t i o nc o s t i n gn e t i n c o mewi l l g e n e r a l l yb e Gr e a t e rt h a nv a r i a b l ec o s t i n gn e t i n c o me L e s st ha nv a r i a bl ec os t i ngn e ti nc ome Eq u a l t ov a r i a b l ec o s t i n gn e t i n c o me L e s st h a ne x p e c t e d I f afi r mu s e sv a r i a b l ec o s t i n g , I t sp r o d u c t c o s t si n c l u d ev a r i a b l es e l l i n ga n da d mi n i s t r a t i v ec o s t s I t sp r ofit sfl uc t ua t ewi t hs a l e s I t c a l c u l a t e sa ni d l ef a c i l i t yv a r i a t i o n I t sp r o d u c t c o s t p e ru n i t c h a n g e sb e c a u s eo f c h a n g e si nt h en u mb e ro f u n i t sp r o d u c e d Wh i c ho f t h ef o l l o wi n gs t a t e me n t sr e g a r d i n ga b s o r p t i o na n dv a r i a b l ec o s t i n gi sc o r r e c t ? Ab s or p t i onc os t i ngr e s ul t si nhi gh e ri nc omewh e nfini s h e dgood si n v e nt or yi nc r e a s e s V a r i a b l ema n u f a c t u r i n gc o s t sa r el o we ru n d e ra b s o r p t i o nc o s t i n g Ov e r h e a dc o s t sa r et r e a t e di nt h es a mema n n e ru n d e rb o t hv a r i a b l ea n da b s o r p t i o nc o s t i n gme t h o d s Pr o fi t sa r ea l wa y st h es a meu n d e rt h et woc o s t i n gme t h o d s Wh i c ho f t h ef o l l o wi n gwo u l dmo s t l i k e l yd e c r e a s et h ep r o d u c t c o s t p e ru n i t u n d e rv a r i a b l ec o s t i n g ? Ad e c r e a s ei nt h ec o mmi s s i o np a i dt os a l e s me nf o re a c hu n i t s o l d Ani n c r e a s ei nt h en u mb e ro f u n i t ss o l d Ad e c r e a s ei nt h er e ma i n i n gu s e f u l l i f eo f af a c t o r ye q u i p me n t d e p r e c i a t e du s i n gt h es t r a i g h t l i n eme t h o d Ani n c r e a s ei nt her e ma i ni n gus e f ul l i f eof af a c t or ye qui p me ntde pr e c i a t e do nt heun i t s of pr odu c t i onme t h od T h ema s t e rb u d g e t Sh o wsac o mp a r i s o no f f o r e c a s t e da n da c t u a l r e s u l t s I sc omp os e dof t heop e r a t i nga ndfi na nc i a l bu dge t s Re fl e c t so n l yt h o s ec o s t c o n t r o l l a b l eb yt h ei n d i v i d u a l ma n a g e r I st h eb u d g e t o f t h ema s t e r o f t h efi r m

Wh i c ho f t h ef o l l o wi n gi sn o t ap r i ma r yp u r p o s eo f p r e p a r i n gab u d g e t ? T oc o mmu n i c a t et h ec o mp a n y ’ sp l a n st h r o u g h o u t t h ee n t i r eb u s i n e s so r g a n i z a t i o n T op r o v i d eab a s i sf o r c o mp a r i s o no f a c t u a l p e r f o r ma n c e T oc o n t r o l r e v e n u e sa n de x p e n s e sd u r i n gag i v e np e r i o d T oma k es u r et ha tt hec omp a n ye x pa ndsi t sope r a t i on

I nb u d g e t i n gp r o c e s s , t o pma n a g e me n t s h o u l d L i mi t t h e i ri n v o l v e me n t b e c a u s et h e yl a c kt h ed e t a i l e dk n o wl e d g eo f t h ed a i l yo p e r a t i o n s Bei n v o l v e do n l yi nt h ea p p r o v a l p r o c e s s Se p a r a t et h eb u d g e t i n gp r o c e s sa n dt h eb u s i n e s sp l a n n i n gp r o c e s si n t ot wos e p a r a t ep r o c e s s e s Bei n v ol v e d, i n c l ud i ngus i n gt heb udge tp r oc e s st oc ommu ni c a t egoa l s Ab u d g e t c a nb ema n yt o o l si no n e . I t c a nb eu s e df o rp l a n n i n g , c o mmu n i c a t i o n s , mo t i v a t i o n , a n dc o n t r o l . F o rt h eb u d g e t a r yp r o c e s st o s e r v ea sac o n t r o l t o o l , T h eo r g a n i z a t i o nmu s t h a v eab u d g e t d i r e c t o r Ab u d g e t c o mmi t t e emu s t b eo r g a n i z e d F o r e c a s t i n gp r o c e d u r e smu s t b ed e v e l o p e d T hebud ge t i nga n da c c ou nt i ngs y s t e mmus tbei nt e gr a t e dors y nc hr on i z e dwi t ht heor g a ni z a t i ona l s t r uc t ur e PROBL EMSOL VI NG Pr obl e m1 Ba g s , I n c . ma n u f a c t u r e sl e a t h e rb a g swi t h3z i p p e r t y p ep o c k e t s . Th ec o mp a n yo u t s o u r c e st h ez i p p e r sa t 8p e ru n i t . Ea c hb a gr e q u i r e s 5d i r e c t l a b o rh o u r st op r o d u c ea t ar a t eo f 1 0p e rh o u r . Bu d g e t e ds a l e so f b a g sf o rt h efi r s t q u a r t e r o f t h ey e a r a n dt h efi r s t mo n t ho f t h e f o l l o wi n gq u a r t e ra r ea sf o l l o ws :

I n v e n t o r yd a t aa r ea sf o l l o ws : J a n u a r y1 : L e a t h e r b a g s–3 6 0 Z i p p e r–1 , 6 2 0 En do f e a c hmo n t h : L e a t h e rb a g s–4 0 %o f t h ef o l l o wi n gmo n t h ’ sb u d g e t e ds a l e s Z i p p e r–6 0 %o f t h ef o l l o wi n gmo n t h ’ sp r o d u c t i o nr e q u i r e me n t Re qu i r e me nt : a . Wh a t i st h eb u d g e t e dp r o d u c t i o no f l e a t h e rb a g sf o r t h efi r s t q u a r t e r ? b . Wh a t i st h eb u d g e t e dp u r c h a s e so f z i p p e rf o rF e b r u a r y ? 4 , 3 5 6 c . Wh a t i st h et o t a l b u d g e t e dz i p p e r a n dl a b o r c o s t f o r t h emo n t ho f Ma r c h ?

Endo fEx a m-

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