Concept explainers
In doing cost analysis, you realize that there could be errors in the accounting records. For example, maintenance costs were recorded as zero in December. However, you know that maintenance was performed in December. You find that maintenance costs were about double the normal monthly amount in the next month, January. You suspect that maintenance costs were not recorded in December, the last month of the year, so the department’s costs would appear to be below budget. The apparent error could affect regression analysis because you are using both December and January in your analysis. Should you report your concerns about the way maintenance costs have been recorded? If so, to whom would you report your concerns?
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Chapter 5 Solutions
Fundamentals Of Cost Accounting (6th Edition)
- Which of the following would be expected to result in a reduction in actual net profit compared to budgeted net profit in an accounting period? Please select all that apply. A decrease in the actual selling price of products compared to the budgeted selling price of products without a corresponding decrease in the actual costs of producing those goods. An increase in actual expenditure on non-current assets compared to budgeted expenditure on non-current assets. A more productive workforce than budgeted. An increase in the actual cost of raw materials compared to the budgeted cost of raw materials without a corresponding increase in the actual selling price of goods produced.arrow_forwardWhich of the following statements about margin of safety is false? a. Margin of safety measures the difference between budgeted revenues and breakeven revenues. b. If the variable cost per unit decreases but the number of units sold, unit selling price and total fixed cost are all constant, the margin of safety decreases. c. If only the fixed costs decrease but the number of units sold and unit selling price and unit variable cost are all constant, the margin of safety increases. d. If only the fixed costs increase but the number of units sold and unit selling price and unit variable cost are all constant, the margin of safety decreases. e. none of the given answers is false.arrow_forward4.-To budget the customer balance in the projected balance sheet, two procedures can be followed that are hidden in the answers, which are? A) Opening balance plus credit sales for the budgeted period minus collections made. B) Apply current turnover to the budgeted period. C) Perform an aging analysis of customer balances. D) Project sales and outstanding balances for the last "n" years. E) Perform an actuarial calculation. Note:You can choose more than one option. Please double check your answer.arrow_forward
- All of the following are possible causes of a favorable labor rate variance except: a lower mix of skilled workers causing hourly rates to be lower than anticipated. a new labor contract that was negotiated at lower pay rates than anticipated. a lower mix of unskilled workers causing hourly rates to be higher than anticipated. product demand that was lower than expected causing a reduction in the amount of overtime initially anticipated.arrow_forwardJensen Tire Auto is deciding whether to purchase a maintenance contract for its new computer wheel alignment and balancing machine. Managers feel that maintenance expense should be related to usage, and they collected the following information on weekly usage (hours) and annual maintenance expense (in hundreds of dollars). a. Develop a scatter chart with weekly usage hours as the independent variable. What does the scatter chart indicate about the relationship between weekly usage and annual maintenance expense? b. Use the data to develop an estimated regression equation that could be used to predict the annual maintenance expense for a given number of hours of weekly usage. What is the estimated regression model? c. Test whether each of the regression parameters 0 and 1 is equal to zero at a 0.05 level of significance. What are the correct interpretations of the estimated regression parameters? Are these interpretations reasonable? d. How much of the variation in the sample values of annual maintenance expense does the model you estimated in part (b) explain? e. If the maintenance contract costs 3,000 per year, would you recommend purchasing it? Why or why not?arrow_forwardWith respect to production volume variance, what variables might a manager be able to adjust mid-year to "make the operation more efficient and less costly"? What variables would he most likely not be able to adjust mid-year?arrow_forward
- You underspend on utilities and recreation by $400 and $500, respectively, with respect to your budget. However, you also underestimated your interest income by $200. What is your forecasting error? Select one: a. A positive forecasting error of $700 b. A negative forecasting error of $1,100 c. A negative forecasting error of $700 d. A positive forecasting error of $1,100arrow_forwardCarter Dry Cleaning has developed two regression analyses for cost estimation. The accounting manager has presented statistical measures for both of these regressions. Regression A has an R-squaredvalue of .53 and a t-value of 1.08. Regression B has an R-squared of .89 and a t-value of 2.17. Whatdo these statistical measures indicate about the regressions? Which regression should Carter DryCleaning use for cost estimation?arrow_forwardThese are True/False questions. ____ 6. If the total unit cost of manufacturing Product Y is currently $36 and the total unit cost after modifying the style is estimated to be $48, the differential cost for this situation is $12. ____ 7. A process whereby the effect of fluctuations in level of activity is built into the budgeting system is referred to as flexible budgeting. ____ 8. In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center. ____ 9. The capital expenditures budget summarizes future plans for acquisition of fixed assets. ____ 10. The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called capital investment analysis.arrow_forward
- 1)A firm follows labour hours to allocate fixed overhead. A positive volume variance occurs a) When managers controlled fixed overhead during the period b) When employees turned more productive c) When actual labour hours is less than budgeted labour hours d) When actual labour hours is more than budgeted labour hours 2) A firm follows machine hours to allocate machine related variable overhead. During the month, the firm reported adverse variable overhead spending variance and favorable variable overhead efficiency variance. It means a)The firm took more hours than standard hours but controlled machine expenses b) The firm controlled machine hours but incurred more expense on operating the machine c) Firm failed on both controlling machine hours and cost but production volume increases d) Firms controlled machine hours, controlled expenses but production volume declined 3) A firm uses machine hours to allocate overhead cost. During the period, budgeted variable overhead is…arrow_forwardty Variance OF Master Budget (19,200 units) 57,600arrow_forwardWhich of the following about gross profit variance analysis is most correct? a. Results of the gross variance analysis should be published at least annually to improve the company’s transparency. b. All of the choices are correct. c. Gross profit variance analysis is a management tool used to track gross profit and improve its performance and profitability in the future. d. A zero-gross profit variance absolutely indicates that the company is able to sell its products at the same price and at the same volume as budgeted or as previous year’s.arrow_forward
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub