Managerial Accounting Chapter 5 & 6

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1/20 Questions

The labor rate variance calculation involves actual direct labor hours used in production. Select one:
- True
- False

About This Quiz

This quiz assesses key concepts in Managerial Accounting from Chapters 5 & 6, focusing on variances, labor rate calculations, and material price standards. It tests understanding of controllable overhead variance, labor efficiency, and material price variance, crucial for effective financial management and decision-making.

Managerial Accounting Chapter 5 & 6 - Quiz

2.

To calculate the controllable overhead variance actual overhead costs are needed. Select one:
- True
- False
Correct Answer

A. True

Explanation

The correct answer is: TRUE
Factory overhead controllable variance is the difference between actual expenses incurred and the budget allowance based on standard hours allowed for work performed.

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3.

Qualitative considerations are as important as cash flow in investment decisions. Select one:
- True
- False
Correct Answer

A. True

Explanation

The correct answer is: TRUE

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4.

Acquisition costs include the cash payments that are required for ownership and any subsequent expenditures required to extend the life of the asset such as a major overhaul. Select one:
- A. TRUE
- B. FALSE
Correct Answer

A. A. TRUE

Explanation

The correct answer is: TRUE

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5.

Price lists are acceptable source documents in developing materials price standards. Select one:
- True
- False
Correct Answer

A. True

Explanation

The correct answer is: TRUE

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6.

Variables common to all investments are: Select one:
- A. Size
- B. Duration
- C. Return
- D. Timing of the return
- E. All of the above
Correct Answer

A. E. All of the above

Explanation

The correct answer is: All of the above

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7.

John Guy is saving for a new boat. He needs $60,000. How much money should he put in a savings account that compounds at 8% to have $60,000? (Round to the nearest dollar).
- A. $36,410
- B. Unable to determine from data given
- C. $38,706
- D. $39,420.
Correct Answer

A. B. Unable to determine from data given

Explanation

The correct answer is: Unable to determine from data given

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8.

Capital gains are tax consequences of the sale of an old asset if Select one:
- A. The asset is sold for any amount other than the book value
- B. the asset is sold for less than the book value
- C. The asset is sold for more than the book value
- D. The future depreciation is not lost
- E. The future depreciation is lost
Correct Answer

A. C. The asset is sold for more than the book value

Explanation

The correct answer is: The asset is sold for more than the book value

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9.

If the actual overhead is $152,000 and the flexible budget overhead for actual production is $151,000, the controllable overhead variance is Select one:
- A. $1000 favorable
- B. $1000 unfavorable
- C. 0
- D. None of the above
Correct Answer

A. B. $1000 unfavorable

Explanation

The correct answer is: $1000 unfavorable
Managers use a flexible budget to isolate overhead variances and to set the standard overhead rate. Flexible budgets show the budgeted amount of manufacturing overhead for various levels of output.

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10.

The standard for direct labor for product C is three hours at $25 per hour. If the direct labor efficiency variance is $1500 unfavorable, how many units were produced? Select one:
- A. 200
- B. 300
- C. 400
- D. Unable to tell from data given
Correct Answer

A. D. Unable to tell from data given

Explanation

The correct answer is: Unable to tell from data given

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11.

Since a firm must outlay cash to acquire assets, their return should be evaluated with the same terms (cash). Select one:
- True
- False
Correct Answer

A. True

Explanation

The correct answer is: TRUE

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12.

If an investment’s net present value is zero, then it's IRR must also be zero. Select one:
- True
- False
Correct Answer

A. False

Explanation

The correct answer is: FALSE

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13.

Jeff Carter is saving for a new speedboat. The cost is $110,000. How much money must he put in a savings account that compounds at 4% annually to have $110,000 in 7 years? (Round to the nearest dollar).
- A. $80,206
- B. $83,589
- C. $80,606
- D. 84,218
Correct Answer

A. B. $83,589

Explanation

The correct answer is: $83,589 . A=P(1+r/n)^nt
A = final amount
P = initial principal balance
r = interest rate
n = number of times interest applied per time period
t = number of time periods elapsed

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14.

Unless an addition to working capital is permanent, it should not be considered among the cash flows of a capital budget. Select one:
- True
- False
Correct Answer

A. False

Explanation

The correct answer is: FALSE
Capital budgeting involves identifying the cash in ﬂows and cash out ﬂows rather than accounting revenues and expenses ﬂowing from the investment. For example, non-expense items like debt principal payments are included in capital budgeting because they are cash ﬂow transactions

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15.

The standard for direct materials for product A is 6 ft.² at $10 per square foot. If a firm produces 100 units of product A and uses 600 ft.² at $11 per square foot, the materials price variance is Select one:
- A. $660 unfavorable
- B. $660 favorable
- C. $600 unfavorable
- D. $600 favorable
Correct Answer

A. C. $600 unfavorable

Explanation

The correct answer is: $600 unfavorable

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16.

The overhead variance between the actual production and the anticipated production is Select one:
- A. The overhead volume variance
- B. The controllable overhead variance
- C. The flexible budget variance
- D. None of the above
Correct Answer

A. A. The overhead volume variance

Explanation

The correct answer is: The overhead volume variance

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17.

Activity-based costing gives more information with respect to Select one:
- A. Direct materials
- B. Direct labor
- C. Overhead
- D. None of the above
Correct Answer

A. C. Overhead

Explanation

The correct answer is: Overhead
Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. This model assigns more indirect costs (overhead) into direct costs compared to conventional costing

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18.

The standard for direct materials for product A is 6 ft.² at $10 per square foot. If a firm produces 100 units of product A and uses 600 ft.² at $11 per square foot, the materials quantity variance is
- A. $660 unfavorable
- B. $660 favorable
- C. 0
- D. None of the above
Correct Answer

A. C. 0

Explanation

The correct answer is: 0
A material quantity variance is the difference between the actual amount of materials used in the production process and the amount that was expected to be used. The measurement is employed to determine the efficiency of a production process in converting raw materials into finished goods

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19.

Standards may be viewed by labor as too loose. Select one:
- True
- False
Correct Answer

A. False

Explanation

The correct answer is: FALSE

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20.

If the hurdle rate used to discount a stream of cash flows is raised, the IRR of the cash stream will Select one:
- A. Always increase
- B. Always decrease
- C. Not change
- D. Increase if the NPV is negative or decrease if the NPV is positive
Correct Answer

A. C. Not change

Explanation

The correct answer is: Not change, not change; Internal Rate of Return is calculated from the undiscounted cash flows. The discounted rate chosen has absolutely nobearing on IRR

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Current Version
Mar 21, 2023

Quiz Edited by
ProProfs Editorial Team
Jan 31, 2020

Quiz Created by
Zach

Managerial Accounting Chapter 5 & 6

The labor rate variance calculation involves actual direct labor hours used in production. Select one:

Quiz Preview

To calculate the controllable overhead variance actual overhead costs are needed. Select one:

Qualitative considerations are as important as cash flow in investment decisions. Select one:

Acquisition costs include the cash payments that are required for ownership and any subsequent expenditures required to extend the life of the asset such as a major overhaul. Select one:

Price lists are acceptable source documents in developing materials price standards. Select one:

Variables common to all investments are: Select one:

John Guy is saving for a new boat. He needs $60,000. How much money should he put in a savings account that compounds at 8% to have $60,000? (Round to the nearest dollar).

Capital gains are tax consequences of the sale of an old asset if Select one:

If the actual overhead is $152,000 and the flexible budget overhead for actual production is $151,000, the controllable overhead variance is Select one:

The standard for direct labor for product C is three hours at $25 per hour. If the direct labor efficiency variance is $1500 unfavorable, how many units were produced? Select one:

Since a firm must outlay cash to acquire assets, their return should be evaluated with the same terms (cash). Select one:

If an investment’s net present value is zero, then it's IRR must also be zero. Select one:

Jeff Carter is saving for a new speedboat. The cost is $110,000. How much money must he put in a savings account that compounds at 4% annually to have $110,000 in 7 years? (Round to the nearest dollar).

Unless an addition to working capital is permanent, it should not be considered among the cash flows of a capital budget. Select one:

The standard for direct materials for product A is 6 ft.² at $10 per square foot. If a firm produces 100 units of product A and uses 600 ft.² at $11 per square foot, the materials price variance is Select one:

The overhead variance between the actual production and the anticipated production is Select one:

Activity-based costing gives more information with respect to Select one:

The standard for direct materials for product A is 6 ft.² at $10 per square foot. If a firm produces 100 units of product A and uses 600 ft.² at $11 per square foot, the materials quantity variance is

Standards may be viewed by labor as too loose. Select one:

If the hurdle rate used to discount a stream of cash flows is raised, the IRR of the cash stream will Select one: