Exam 5: Accounting for Inventory

Budgets help companies with which of the following?

According to the IMA, one of the goals of managerial accounting is to provide decision-makers with insight into the marginal/incremental aspects of the alternatives they are considering.

A company currently produces both regular and deluxe models of a particular product. The deluxe model requires the company to buy special metal trim for decoration. If the company stops producing the deluxe model, it will no longer need to buy the metal trim. In considering whether to stop producing the deluxe model, the trim is best characterized as

Which types of costs are typically not "avoidable" costs in a decision to accept a special order to make 10,000 units of product in a factory?

The Xu Corp. is considering making an investment that costs $10 million. It expects to receive cash inflows of $3 million per year for eight years. The interest rates right now in the market are 5%. If interest rates rise to 6%, then:

The fixed volume spending variance = actual fixed overhead - budgeted fixed overhead.

Accounting research finds that in practice, managers often base their product pricing decisions and decisions to keep or drop products on the "full costs" of products, including the sunk costs.

The raw materials price variance = standard quantity × (actual price - standard price)

The method of evaluating long-term investment decisions that involves computing the present value of the future inflows, and subtracting the cost of the investment, is called the

The accounting rate of return method of evaluating capital investments explicitly considers the time value of money.

A likely advantage of a top-down budgetary process (compared to a participatory budget process) is

A "fixed responsiveness relationship" exists when the amount of the input varies in a straight-line relation with a cost driver.

The payback period method of evaluating capital investments explicitly considers the time value of money.

Which of the following statements about sunk costs is true?

The Specialty T-shirt Company is now operating at capacity. It is considering taking in a special order to make 5,000 "Spring Break" T-shirts, which it can sell at $30 each. If it makes these shirts, it will have to make 5,000 fewer regular T-shirts, which sell at $10 each. The reduction in revenue due to making fewer regular t-shirts is an example of

According to the IMA, the primary purpose of managerial accounting is to provide current and potential investors and creditors with the information needed to make intelligent investment and lending decisions.

Every car that Volkswagen sells has four wheels. The relation between the number of wheels that Volkswagen must buy and the number of cars it sells is an example of the concept of

The direct labor rate variance = actual labor hours × (actual rate - standard rate)

Let AR = actual hourly rate for direct labor, SR = the standard hourly rate, AH = the actual direct labor hours used, and SH = the standard direct labor hours for a given level of production. The direct labor rate variance equals

The Liu Company is trying to decide whether to accept a special order of 1,000 items from a new customer. It has limited capacity. If it accepts this order, it will not be able to produce 200 units for one of its existing customers. The loss of revenue from the 200 units is best described as which of the following?