Unit 3 Exam

Each question is worth 5 points

1. Standard costs may be used by
a. universities.
b. governmental agencies.
c. charitable organizations.
d. all of these.



2. Which of the following statements is false?
a. A standard cost is more accurate than a budgeted cost.
b. A standard is a unit amount.
c. In concept, standards and budgets are essentially the same.
d. The standard cost of a product is equivalent to the budgeted cost per unit of product.



3. Budget data are not journalized in cost accounting systems with the exception of
a. the application of manufacturing overhead.
b. direct labor budgets.
c. direct materials budgets.
d. cash budget data.



4. It is possible that a company's financial statements may report inventories at
a. budgeted costs.
b. standard costs.
c. both budgeted and standard costs.
d. none of these.



5. A standard differs from a budget because a standard
a. is a predetermined cost.
b. contributes to management planning and control.
c. is a unit amount.
d. none of the above; a standard does not differ from a budget.


6. Marburg Co. expects direct materials cost of $6 per unit for 100,000 units (a total of
$600,000 of direct materials costs). Marburgs standard direct materials cost and
budgeted direct materials cost is
Standard Budgeted
a. $6 per unit $600,000 per year
b. $6 per unit $6 per unit
c. $600,000 per year $6 per unit
d. $600,000 per year $600,000 per year




7. The standard direct materials quantity does not include allowances for
a. unavoidable waste.
b. normal spoilage.
c. unexpected spoilage.
d. all of the above are included.


8. Allowances should not be made in the direct labor quantity standard for
a. wasted time.
b. rest periods.
c. cleanup.
d. machine downtime.



9. The standard predetermined overhead rate used in setting the standard overhead cost is
determined by dividing
a. budgetedoverhead costs by an expected standard activity index.
b. actualoverhead costs by an expected standard activity index.
c. budgetedoverhead costs by actual activity.
d. actualoverhead costs by actual activity.



10. Hofburgs standard quantities for 1 unit of product include 2 pounds of materials and 1.5
labor hours. The standard rates are $2 per pound and $7 per hour. The standard
overhead rate is $8 per direct labor hour. The total standard cost of Hofburgs product is
a. $14.50.
b. $17.00.
c. $22.50.
d. $26.50.


11. All of the following are involved in the capital budgeting evaluation process except a
company's
a. board of directors.
b. capital budgeting committee.
c. officers.
d. stockholders.


12. Most of the capital budgeting methods use
a. accrual accounting numbers.
b. cash flow numbers.
c. net income.
d. accrual accounting revenues.


13. The first step in the capital budgeting evaluation process is to
a. request proposals for projects.
b. screen proposals by a capital budgeting committee.
c. determine which projects are worthy of funding.
d. approve the capital budget.



14. The capital budgeting decision depends in part on the
a. availability of funds.
b. relationships among proposed projects.
c. risk associated with a particular project.
d. all of these.


15. Capital budgeting is the process
a. used in sell or process further decisions.
b. of determining how much capital stock to issue.
c. of making capital expenditure decisions.
d. of eliminating unprofitable product lines.


16. Net annual cash flow can be estimated by
a. deducting credit sales from net income.
b. adding depreciation expense to net income.
c. deducting credit purchases from net income.
d. adding advertising expense to net income.


17. A companys discount rate is based on the
a. cost of capital and the internal rate of return.
b. cost of capital and the risk element.
c. cut-off rate and the risk element.
d. cut-off rate and the internal rate of return.



18. The discount rate that will result in the lowest net present value for a project is
a. any rate lower that the cost of capital.
b. any rate higher than the cost of capital.
c. the lowest rate used to evaluate the project.
d. the highest rate used to evaluate the project.


19. The discount rate that will result in the highest net present value for a project is
a. any rate lower that the cost of capital.
b. any rate higher than the cost of capital.
c. the lowest rate used to evaluate the project.
d. the highest rate used to evaluate the project.



20. Which of the following will increase the net present value of a project?
a. An increase in the initial investment
b. A decrease in annual cash inflows
c. An increase in the discount rate
d. A decrease in the discount rate