Special Decisions
What is a historical cost that cannot be changed and is not relevant for decision making?
Sunk cost
A budget that combines all department budgets is a _______?
Master budget
Which budget is also known as the master budget?
Static budget
A flexible budget uses the ___________ cost/price.
What are the two criteria that make information relevant?
1. Differs between alternatives
2. Future-oriented
The starting point for the master budget is the ________________.
Sales budget
Do fixed costs change between static and flexible budgets?
No
Expected future revenues that differ among the alternatives under consideration are often referred to as:
Differential revenues
Give an example of a facility-level cost.
Rent, depreciation, insurance, taxes
What are the three componenets of a master budget?
1. Operating budgets
2. Capital budgets
3. Pro forma financial statements
If actual costs are higher than standard costs, would a variance be favorable or unfavorable?
If flexible budget sales revenue is greater than the static budget sales revenue, would the sales revenue volume variance be favorable or unfavorable?
Favorable
The cost of a patent is what level in the cost hierarchy?
Product-level
List the four advantages of budgeting.
1. Planning
2. Coordination
3. Performance Measurement
4. Corrective Action
What is the formula for calculating a volume variance?
(planned volume x standard price) - (actual volume x standard price)
The Mason Company estimated that June sales would be 150,000 units with an average selling price of $10.00. Actual sales for June were 145,000 units, and average selling price was $10.50. The sales volume variance was:
$50,000 U
A new graduate can either start their own accounting business and earn $50,000 per year or work for a CPA firm and earn $45,000 per year. If they choose to be self-employed, what is the opportunity cost (in $)?
$45,000
A company expects sales of $200,000 for the month of January. If 30% of sales are cash and 70% are on account, how much cash sales will be recorded for the month of January?
$60,000
What is the formula for calculating a flexible budget variance?
(actual volume x standard price) - (actual volume x actual price)
Who is typically responsible for volume variances?
Marketing managers