ACCTG 9
Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget: July August September Planned production in units 1,000 1,100 980 33. The cost of platinum to be purchased to support August production is: A. $195,840. B. $198,000. C. $200,160. D. $391,680. E. Some other amount.
A. $195,840.
Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 $ 70,200 Direct material used 23,100 pounds at $2.70 62,370 Direct labor 40,100 hours at $7.30 292,730 33. The direct-material quantity variance is: A. $750F. B. $750U. C. $6,500U. D. $7,250U. E. none of the above.
A. $750F.
York Corporation plans to sell 41,000 units of its single product in March. The company has 2,800 units in its March 1 finished-goods inventory and anticipates having 2,400 completed units in inventory on March 31. On the basis of this information, how many units does York plan to produce during March? A. 40,600. B. 41,400. C. 43,800. D. 46,200. E. Some other amount.
A. 40,600.
31. An examination of Short Corporation's inventory accounts revealed the following information: Raw materials, June 1: 46,000 units Raw materials, June 30: 51,000 units Purchases of raw materials during June: 185,000 units Short's finished product requires four units of raw materials. On the basis of this information, how many finished products were manufactured during June? A. 45,000. B. 47,500. C. 57,750. D. 70,500. E. Some other amount.
A. 45,000.
Simms Corporation had a favorable direct-labor efficiency variance of $6,000 for the period just ended. The actual wage rate was $0.50 more than the standard rate of $12.00. If the company's standard hours allowed for actual production totaled 9,500, how many hours did the firm actually work? A. 9,000. B. 9,020. C. 9,980. D. 10,000. E. None of the above.
A. 9,000.
May Production Company, which uses activity-based budgeting, is in the process of preparing a manufacturing overhead budget. Which of the following would likely appear on that budget? A. Batch-level costs: Production setup. B. Unit-level costs: Depreciation. C. Unit-level costs: Maintenance. D. Product-level costs: Insurance and property taxes. E. Facility and general operations-level costs: Indirect material.
A. Batch-level costs: Production setup.
Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards? A. Production time lost during unusual machinery breakdowns. B. Normal worker fatigue. C. Freight charges on incoming raw materials. D. Production time lost during setup procedures for new manufacturing runs. E. The historical 2% defect rate associated with raw material inputs.
A. Production time lost during unusual machinery breakdowns.
Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the materials price variance and the materials quantity variance? Price Variance Quantity Variance A. Used Always used B. Used Occasionally used C. Used Not used D. Not used Always used E. Not used Not used
A. Used Always used
A budget serves as a benchmark against which: A. actual results can be compared. B. allocated results can be compared. C. actual results become inconsequential. D. allocated results become inconsequential. E. cash balances can be compared to expense totals.
A. actual results can be compared.
Generally speaking, budgets are not used to: A. identify a company's most profitable products. B. evaluate performance. C. create a plan of action. D. assist in the control of profit and operations. E. facilitate communication and coordinate activities.
A. identify a company's most profitable products.
Most companies base the calculation of the materials price variance on the: A. number of units purchased. B. number of units spoiled. C. number of units that should have been used. D. number of units actually used. E. number of units to be purchased during the next accounting period
A. number of units purchased.
A manufacturing firm would begin preparation of its master budget by constructing a: A. sales budget. B. production budget. C. cash budget. D. capital budget. E. set of pro-forma financial statements
A. sales budget.
The budgeted income statement, budgeted balance sheet, and budgeted statement of cash flows comprise: A. the final portion of the master budget. B. the depiction of an organization's overall actual financial results. C. the first step of the master budget. D. the portion of the master budget prepared after the sales forecast and before the remainder of the operational budgets. E. the second step of the master budget.
A. the final portion of the master budget.
Direct material standard: 3 square feet at $2.50 per square foot Direct material purchases: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity, product no. 89: 9,600 units completed 22. The direct-material quantity variance is: A. $1,000F. B. $1,000U. C. $1,040F. D. $1,040U. E. $2,000F.
B. $1,000U.
Holland Enterprises recently used 20,000 labor hours to produce 8,300 completed units. According to manufacturing specifications, each unit is anticipated to take 2.5 hours to complete. The company's actual payroll cost amounted to $370,000. If the standard labor cost per hour is $18, Holland's labor rate variance is: A. $10,000F. B. $10,000U. C. $10,375F. D. $10,375U. E. none of the above.
B. $10,000U.
Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Denver's labor efficiency variance is: A. $11,000U. B. $11,000F. C. $11,300U. D. $11,300F. E. none of the above.
B. $11,000F.
Drago makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for June July, and August were $120,000, $160,000, and $220,000, respectively, what were the firm's budgeted collections for August and the company's budgeted receivables balance on August 31? August Collections August 31 Receivables Balance A. $162,000 $182,000 B. $174,000 $170,000 C. $190,000 $154,000 D. $262,000 $ 82,000 E. Some other combination of figures not listed above.
B. $174,000 $170,000
Consider the following information: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total actual direct labor cost $241,500 Direct-labor efficiency variance, favorable $3,200 The direct-labor rate variance is: A. $17,250U. B. $20,700U. C. $20,700F. D. $21,000F. E. none of the above.
B. $20,700U.
Wolfe, Inc., began operations on January 1 of the current year with a $12,000 cash balance. Forty percent of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase. The following data apply to January and February: January February Sales $35,000 $55,000 Purchases 30,000 40,000 Operating expenses 7,000 9,000 If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the change in Wolfe's cash balance during February. A. $2,000 increase. B. $4,500 increase. C. $5,000 increase. D. $7,500 increase. E. Some other amount.
B. $4,500 increase.
Vern's makes all sales on account, subject to the following collection pattern: 20% are collected in the month of sale; 70% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for October, November, and December were $70,000, $60,000, and $50,000, respectively, what was the budgeted receivables balance on December 31? A. $40,000. B. $46,000. C. $49,000. D. $59,000. E. Some other amount.
B. $46,000.
The following data relate to product no. 33 of La Quinta Corporation: Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity, product no. 33: 8,900 units completed The direct-labor efficiency variance is: A. $7,000F. B. $7,000U. C. $7,100F. D. $7,100U. E. none of the above.
B. $7,000U
Victoria, Inc., recently completed 52,000 units of a product that was expected to consume five pounds of direct material per finished unit. The standard price of the direct material was $9 per pound. If the firm purchased and consumed 268,000 pounds in manufacturing (cost = $2,304,800), the direct-materials quantity variance would be figured as: A. $72,000F. B. $72,000U. C. $107,200F. D. $107,200U. E. none of the above.
B. $72,000U.
When an organization involves its many employees in the budgeting process in a meaningful way, the organization is said to be using: A. budgetary slack. B. participative budgeting. C. budget padding. D. imposed budgeting. E. employee-based budgeting.
B. participative budgeting.
Wilson Corporation is budgeting its equipment needs on an on-going basis, with a new quarter being added to the budget as the current quarter is completed. This type of budget is most commonly known as a: A. capital budget. B. rolling budget. C. revised budget. D. pro-forma budget. E. financial budget.
B. rolling budget.
Courtney purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Courtney's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, determine the actual price paid for a gallon of direct material. A. $0.50. B. $0.60. C. $0.70. D. An amount other than those shown above. E. Not enough information to judge.
C. $0.70.
Consider the following information: Direct material purchased and used, 80,000 gallons Standard quantity of direct material allowed for May production, 76,000 gallons Actual cost of direct materials purchased and used, $176,000 Unfavorable direct-material quantity variance, $9,400 The direct-material price variance is: A. $11,400F. B. $11,400U. C. $12,000F. D. $12,000U. E. none of the above.
C. $12,000F.
Brooklyn makes all purchases on account, subject to the following payment pattern: Paid in the month of purchase: 30% Paid in the first month following purchase: 65% Paid in the second month following purchase: 5% If purchases for April, May, and June were $200,000, $160,000, and $250,000, respectively, what was the firm's budgeted payables balance on June 30? A. $175,000. B. $179,000. C. $183,000. D. $189,000. E. Some other amount.
C. $183,000.
Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget: July August September Planned production in units 1,000 1,100 980 If it takes two direct labor hours to produce each unit and Northwest's cost per labor hour is $15, direct labor cost for August would be budgeted at: A. $16,500. B. $31,200. C. $33,000. D. $34,800. E. Some other amount.
C. $33,000.
Uno makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for October, November, and December were $70,000, $80,000, and $60,000, respectively, what were the firm's budgeted collections for December? A. $18,000. B. $66,000. C. $73,000. D. $74,000. E. Some other amount.
C. $73,000.
Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 $ 70,200 Direct material used 23,100 pounds at $2.70 62,370 Direct labor 40,100 hours at $7.30 292,730 The direct-labor rate variance is: A. $7,800F. B. $7,950F. C. $8,020F. D. $8,000U. E. none of the above.
C. $8,020F.
Tidewater plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of raw material. Pertinent data follow. Product No. 794 Raw Material Actual May 1 inventory 11,000 units 29,000 units Desired May 31 inventory 17,000 units 20,000 units On the basis of the information presented, how many units of raw material should Tidewater purchase for use in May production? A. 228,000. B. 246,000. C. 264,000. D. 282,000. E. Some other amount.
C. 264,000.
Swanson plans to sell 10,000 units of a particular product during July, and expects sales to increase at the rate of 10% per month during the remainder of the year. The June 30 and September 30 ending inventories are anticipated to be 1,100 units and 950 units, respectively. On the basis of this information, how many units should Swanson purchase for the quarter ended September 30? A. 31,850. B. 32,150. C. 32,950. D. 33,250. E. Some other amount.
C. 32,950.
Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 $ 70,200 Direct material used 23,100 pounds at $2.70 62,370 Direct labor 40,100 hours at $7.30 292,730 The standard hours allowed for the work performed are: A. 5. B. 5.14. C. 39,000. D. 40,100. E. none of the above.
C. 39,000.
Company A uses a heavily participative budgeting approach whereas at Company B, top management develops all budgets and imposes them on lower-level personnel. Which of the following statements is false? A. A's employees will likely be more motivated to achieve budgetary goals than the employees of Company B. B. B's employees may be somewhat disenchanted because although they will be evaluated against a budget, they really had little say in budget development. C. Budget padding will likely be a greater problem at Company B. D. Budget preparation time will likely be longer at Company A. E. Ethical issues are more likely to arise at Company A, especially when the budget is used as a basis for performance appraisal.
C. Budget padding will likely be a greater problem at Company B.
Which of the following budgets is prepared at the end of the budget-construction cycle? A. Sales budget. B. Production budget. C. Budgeted financial statements. D. Cash budget. E. Overhead budget.
C. Budgeted financial statements.
The following events took place when Managers A, B, and C were preparing budgets for the upcoming period: I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local authorities. II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor. III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the department when preparing the labor budget. Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example of building slack in budgets? A. I only. B. II only. C. III only. D. I and II. E. II and III.
C. III only.
Santa Fe Corporation has a highly automated production facility. Which of the following correctly shows the two factors that would likely have the most direct influence on the company's manufacturing overhead budget? A. Sales volume and labor hours. B. Contribution margin and cash payments. C. Production volume and management judgment. D. Labor hours and management judgment. E. Management judgment and indirect labor cost.
C. Production volume and management judgment.
Which of the following is a predetermined estimated cost that can be used in the calculation of a variance? A. Product cost. B. Actual cost. C. Standard cost. D. Differential cost. E. Marginal cost.
C. Standard cost.
Which of the following are methods for setting standards? A. Analysis of historical data. B. Task analysis. C. Task analysis and the analysis of historical data. D. Matrix application forms. E. Goal congruence.
C. Task analysis and the analysis of historical data.
The comprehensive set of budgets that serves as a company's overall financial plan is commonly known as: A. an integrated budget. B. a pro-forma budget. C. a master budget. D. a financial budget. E. a rolling budget.
C. a master budget.
Solo Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon. Usage by the end of the period amounted to 23,000 gallons. If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as: A. $800F. B. $9,200F. C. $9,200U. D. $10,000F. E. $10,000U.
D. $10,000F.
28. Alex Company recently completed 10,600 units of its single product, consuming 32,000 labor hours that cost the firm $480,000. According to manufacturing specifications, each unit should have required 3 hours of labor time at $15.40 per hour. On the basis of this information, determine Alex's labor rate variance and labor efficiency variance. Rate Efficiency A. $12,720F $3,000F B. $12,720F $3,000U C. $12,800F $3,080F D. $12,800F $3,080U E. $12,800U $3,080U
D. $12,800F $3,080U
Diego makes all purchases on account, subject to the following payment pattern: Paid in the month of purchase: 30% Paid in the first month following purchase: 60% Paid in the second month following purchase: 10% If purchases for January, February, and March were $200,000, $180,000, and $230,000, respectively, what were the firm's budgeted payments in March? A. $69,000. B. $138,000. C. $177,000. D. $197,000. E. Some other amount.
D. $197,000.
Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 $ 70,200 Direct material used 23,100 pounds at $2.70 62,370 Direct labor 40,100 hours at $7.30 292,730 The direct-material price variance is: A. $4,620F. B. $4,620U. C. $5,200F. D. $5,200U. E. none of the above.
D. $5,200U.
Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 $ 70,200 Direct material used 23,100 pounds at $2.70 62,370 Direct labor 40,100 hours at $7.30 292,730 The direct-labor efficiency variance is: A. $8,000F. B. $8,000U. C. $8,250F. D. $8,250U. E. none of the above.
D. $8,250U.
The following data relate to product no. 33 of La Quinta Corporation: Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity, product no. 33: 8,900 units completed 29. The direct-labor rate variance is: A. $8,900F. B. $8,900U. C. $9,000F. D. $9,000U. E. none of the above.
D. $9,000U.
The Grainger Company's budgeted income statement reflects the following amounts: Sales Purchases Expenses January $120,000 $78,000 $24,000 February 110,000 66,000 24,200 March 125,000 81,250 27,000 April 130,000 84,500 28,600 Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year. Grainger pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1: Cash $88,000 Accounts receivable* 58,000 Accounts payable 72,000 *Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February. The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred. 41. Grainger's expected cash balance at the end of January is: A. $87,000. B. $89,160. C. $92,000. D. $94,160. E. $113,160.
D. $94,160.
Nguyen plans to sell 40,000 units of product no. 75 in June, and each of these units requires five square feet of raw material. Pertinent data follow. Product No. 75 Raw Material Actual June 1 inventory 5,500 18,000 square feet Estimated June 30 inventory 4,300 ? square feet If the company purchases 201,000 square feet of raw material during the month, the estimated raw-material inventory on June 30 would be: A. 11,000 square feet. B. 13,000 square feet. C. 23,000 square feet. D. 25,000 square feet. E. some other amount.
D. 25,000 square feet.
The master budget contains the following components, among others: (1) direct-material budget, (2) budgeted balance sheet, (3) production budget, and (4) cash budget. Which of these components would be prepared first and which would be prepared last? First Last A. 1 4 B. 1 2 C. 3 4 D. 3 2 E. 4 1
D. 3 2
Which of the following would depict the logical order for preparing (1) a production budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget? A. 1-3-4-2. B. 2-3-1-4. C. 2-1-3-4. D. 3-1-4-2. E. 3-1-2-4.
D. 3-1-4-2.
Telcer & Company had 3,000 units in finished-goods inventory on December 31. The following data are available for the upcoming year: January February Units to be produced 9,400 10,200 Desired ending finished-goods inventory 2,500 2,100 The number of units the company expects to sell in January is: A. 6,900. B. 8,900. C. 9,400. D. 9,900. E. 11,900.
D. 9,900.
Variances are computed by taking the difference between which of the following? A. Product cost and period cost. B. Actual cost and differential cost. C. Price factors and rate factors. D. Actual cost and standard cost. E. Product cost and standard cost.
D. Actual cost and standard cost.
Which of the following budgets is based on many other master-budget components? A. Direct labor budget. B. Overhead budget. C. Sales budget. D. Cash budget. E. Selling and administrative expense budget.
D. Cash budget.
Which of the following statements about financial planning models (FPMs) is (are) false? A. FPMs express a company's financial and operating relationships in mathematical terms. B. FPMs allow a user to explore the impact of changes in variables. C. FPMs are commonly known as "what-if" models. D. FPMs have become less popular in recent years because of computers and spreadsheets. E. Statements "C" and "D" are both false.
D. FPMs have become less popular in recent years because of computers and spreadsheets.
Consider the following statements: I. The standard cost per unit of materials is used to calculate a materials price variance. II. The standard cost per unit of materials is used to calculate a materials quantity variance. III. The standard cost per unit of materials cannot be determined until the end of the period. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. I, II, and III.
D. I and II.
Consider the following statements about budgeting and a product's life cycle: I. Budgets should focus on costs that are incurred only after a product has been introduced to the marketplace. II. Life-cycle costs would include those related to product planning, preliminary design, detailed design and testing, production, and distribution and customer service. III. When a life cycle is short, companies must make certain that before a commitment is made to a product, the product's life-cycle costs are covered. Which of the above statements is (are) true? A. I only. B. II only. C. I and II. D. II and III. E. I, II, and III.
D. II and III.
Consider the following statements about variance investigation: I. Variance investigation involves a look at only unfavorable variances. II. Variance investigation is typically based on a cost-benefit analysis. III. Variance investigation is often performed by establishing guidelines similar to the following: Investigate variances that are greater than $X or greater than Y% of standard cost. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. II and III. E. I, II, and III.
D. II and III.
Consider the following statements about zero-base budgeting: I. The budget for virtually every activity in an organization is initially set to the level that existed during the previous year. II. The budget forces management to rethink each phase of an organization's operations before resources are allocated. III. To receive funding for the upcoming period, individual activities must be justified in terms of continued usefulness to the organization. Which of the above statements is (are) true? A. II only. B. III only. C. I and II. D. II and III. E. I, II, and III.
D. II and III.
Which of the following would be considered when preparing a company's sales forecast? Anticipated Advertising Campaigns General Economic Trends Expected Competitive Actions A. Yes Yes No B. Yes No Yes C. Yes No No D. Yes Yes Yes E. No No Yes
D. Yes Yes Yes
End-of-period figures for accounts receivable and payables to suppliers would be found on the: A. cash budget. B. budgeted schedule of cost of goods manufactured. C. budgeted income statement. D. budgeted balance sheet. E. budgeted statement of cash flows.
D. budgeted balance sheet.
The term "management by exception" is best defined as: A. choosing exceptional managers. B. controlling actions of subordinates through acceptance of management techniques. C. investigating unfavorable variances. D. devoting management time to investigate significant variances. E. controlling costs so that non-zero variances are treated as "exceptional."
D. devoting management time to investigate significant variances.
When considering whether to investigate a variance, managers should consider all of the following except the variance's: A. size. B. pattern of recurrence. C. trends over time. D. nature, namely, whether it is favorable or unfavorable. E. controllability.
D. nature, namely, whether it is favorable or unfavorable.
A company's sales forecast would likely consider all of the following factors except: A. political and legal events. B. advertising and pricing policies. C. general economic and industry trends. D. top management's attitude toward decentralized operating structures. E. competition.
D. top management's attitude toward decentralized operating structures.
Which of the following statements concerning the budget director is false? A. The budget director is often the organization's controller. B. The budget director has the responsibility of specifying the process by which budget data will be gathered. C. The budget director collects information and participates in preparing the master budget. D. The budget director communicates budget procedures and deadlines to employees throughout the organization. E. The budget director usually has the authority to give final approval to the master budget.
E. The budget director usually has the authority to give final approval to the master budget.
The Grainger Company's budgeted income statement reflects the following amounts: Sales Purchases Expenses January $120,000 $78,000 $24,000 February 110,000 66,000 24,200 March 125,000 81,250 27,000 April 130,000 84,500 28,600 Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year. Grainger pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1: Cash $88,000 Accounts receivable* 58,000 Accounts payable 72,000 *Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February. The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred. Grainger's budgeted cash payments in February are: A. $75,660. B. $94,860. C. $97,200. D. $99,860. E. $102,200.
B. $94,860.
Atlanta Sporting Goods sells bicycles throughout the southeastern United States. The following data were taken from the most recent quarterly sales forecast: End-of-Month Expected Sales Target Inventory April 1,700 units 200 units May 1,850 units 270 units June 2,000 units 310 units On the basis of the information presented, how many bicycles should the company purchase in May? A. 1,780. B. 1,920. C. 2,050. D. 2,120. E. Some other amount.
B. 1,920.
A company that uses activity-based budgeting performs the following: 1—Plans activities for the budget period. 2—Forecasts the demand for products and services as well as the customers to be served. 3—Budgets the resources necessary to carry out activities. Which of the following denotes the proper order of the preceding activities? A. 1-2-3. B. 2-1-3. C. 2-3-1. D. 3-1-2. E. 3-2-1.
B. 2-1-3
Coleman, Inc., anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July, August, and September, respectively. Company policy is to maintain an ending finished-goods inventory equal to 40% of the following month's sales. On the basis of this information, how many units would the company plan to produce in August? A. 46,800. B. 49,200. C. 49,800. D. 52,200. E. Some other amount.
B. 49,200.
Consider the following statements about budget administration: I. Regardless of size, the budgeting process is a very formal process in all organizations. II. The budget manual is prepared to communicate budget procedures and deadlines to employees throughout an organization. III. Effective internal control procedures require that the budget director be an individual other than the controller. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. I and III.
B. II only.
Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards? Perfection Standards Practical Standards A. Attainable in an ideal environment Incorporate abnormal occurrences when setting quantity and efficiency targets B. Result in many unfavorable variances Are often attainable by workers C. Tend to boost worker morale Generally preferred by behavioral scientists D. Generally, are easily achieved by workers Result in both favorable and unfavorable variances E. Generally preferred by behavioral scientists Are easier to achieve than perfection standards
B. Result in many unfavorable variances Are often attainable by workers
FastTec, which sells electronics in retail outlets and on the Internet, uses activity-based budgeting in the preparation of its selling, general, and administrative expense budget. Which of the following costs would the company likely classify as a unit-level expense on its budget? A. Media advertising. B. Retail outlet sales commissions. C. Salaries of web-site maintenance personnel. D. Administrative salaries. E. Salary of sales manager employed at store no. 23
B. Retail outlet sales commissions.
If a manager builds slack into a budget, how would that manager handle estimates of revenues and expenses? Revenues Expenses A. Underestimate Underestimate B. Underestimate Overestimate C. Overestimate Underestimate D. Overestimate Overestimate E. Estimate correctly Estimate correctly
B. Underestimate Overestimate
Which of the following choices correctly denotes managerial functions that are commonly associated with budgeting? Planning Performance Evaluation Coordination of Activities A. Yes Yes No B. Yes Yes Yes C. Yes No No D. Yes No Yes E. No Yes No
B. Yes Yes Yes
A favorable labor efficiency variance is created when: A. actual labor hours worked exceed standard hours allowed. B. actual hours worked are less than the standard hours allowed. C. actual wages paid are less than amounts that should have been paid. D. actual units produced exceed budgeted production levels. E. actual units produced exceed standard hours allowed.
B. actual hours worked are less than the standard hours allowed.
The difference between the revenue or cost projection that a person provides, and a realistic estimate of the revenue or cost, is called: A. passing the buck. B. budgetary slack. C. false budgeting. D. participative budgeting. E. resource allocation processing
B. budgetary slack.
A standard cost: A. is the "true" cost of a unit of production. B. is a budget for the production of one unit of a product or service. C. can be useful in calculating equivalent units. D. is normally the average cost within an industry. E. is almost always the actual cost from previous years.
B. is a budget for the production of one unit of a product or service.
A perfection standard: A. tends to motivate employees over a long period of time. B. is attainable in an ideal operating environment. C. would make allowances for normal amounts of scrap and waste. D. is generally preferred by behavioral scientists. E. will result in a number of favorable variances on a performance report.
B. is attainable in an ideal operating environment.
The Grainger Company's budgeted income statement reflects the following amounts: Sales Purchases Expenses January $120,000 $78,000 $24,000 February 110,000 66,000 24,200 March 125,000 81,250 27,000 April 130,000 84,500 28,600 Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year. Grainger pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1: Cash $88,000 Accounts receivable* 58,000 Accounts payable 72,000 *Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February. The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred. Grainger's budgeted cash receipts in February are: A. $91,000. B. $95,000. C. $113,090. D. $113,640. E. $114,000.
E. $114,000.
Direct material standard: 3 square feet at $2.50 per square foot Direct material purchases: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity, product no. 89: 9,600 units completed The direct-material price variance is: A. $2,880U. B. $2,920F. C. $2,920U. D. $3,000F. E. $3,000U.
E. $3,000U.
Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards? A. The purchasing manager. B. A production supervisor. C. An engineer. D. A machine operator. E. A company's president.
E. A company's president.
Which of the following correctly lists all the information needed to calculate a labor rate variance? A. Standard labor rate and actual hours worked. B. Actual hours worked and actual units produced. C. Standard labor rate, actual labor rate, and actual units produced. D. Actual labor rate and actual hours worked. E. Actual labor rate, standard labor rate, and actual hours worked.
E. Actual labor rate, standard labor rate, and actual hours worked.
Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation? A. Price, unfavorable; quantity, unfavorable. B. Price, unfavorable; quantity, favorable. C. Price, favorable; quantity, unfavorable. D. Price favorable; quantity, favorable. E. All of the above.
E. All of the above.
Which of the following would be considered if a company desires to establish a series of practical manufacturing standards? A. The productivity loss associated with a short-term worker slowdown. B. Normal defect rates in an assembly process. C. Highly unusual spoilage rates with direct materials. D. Quantity discounts associated with purchases of direct materials. E. Both "B" and "D"
E. Both "B" and "D"
Which of the following outcomes is (are) sometimes associated with participative budgeting? A. Employees make little effort to achieve budgetary goals. B. Budget preparation time can be somewhat lengthy. C. The problem of budget padding may arise. D. Financial modeling becomes much more difficult to undertake. E. Budget preparation time can be somewhat lengthy and budget padding may arise.
E. Budget preparation time can be somewhat lengthy and budget padding may arise.
Consider the following statements about budgetary slack: I. Managers build slack into a budget so that they stand a greater chance of receiving favorable performance evaluations. II. Budgetary slack is used by managers to guard against uncertainty and unforeseen events. III. Budgetary slack is used by managers to guard against dollar cuts by top management in the resource allocation process. Which of the above statements is (are) true? A. I only. B. II only. C. I and II. D. II and III. E. I, II, and III.
E. I, II, and III.
Consider the following statements about companies that are involved with international operations: I. Budgeting for these firms is often very involved because of fluctuating values in foreign currencies. II. Multinational firms may encounter hyperinflationary economies. III. Such organizations often face changing laws and political climates that affect business activity. Which of the above statements is (are) true? A. I only. B. III only. C. I and II. D. II and III. E. I, II, and III.
E. I, II, and III.
Consider the following statements: I. Behavioral scientists find that perfection standards often discourage employees and result in low worker morale. II. Practical standards are also known as attainable standards. III. Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. II and III. E. I, II, and III.
E. I, II, and III.
Which of the following variances are most similar with respect to the manner in which they are calculated? A. Labor rate variance and labor efficiency variance. B. Materials price variance and materials quantity variance. C. Materials price variance, materials quantity variance, and total materials variance. D. Materials price variance and labor efficiency variance. E. Materials quantity variance and labor efficiency variance.
E. Materials quantity variance and labor efficiency variance.
Which of the following organizations is not likely to use budgets? A. Manufacturing firms. B. Merchandising firms. C. Firms in service industries. D. Nonprofit organizations. E. None of the above, as all are likely to use budgets.
E. None of the above, as all are likely to use budgets.
Which of the following would have no effect, either direct or indirect, on an organization's cash budget? A. Sales revenues. B. Outlays for professional labor. C. Advertising expenditures. D. Raw material purchases. E. None of the above, as all of these items would have some influence.
E. None of the above, as all of these items would have some influence.
Which of the following variances cannot occur together during the same accounting period? A. Unfavorable labor rate variance and favorable labor efficiency variance. B. Unfavorable labor efficiency variance and favorable materials quantity variance. C. Favorable labor rate variance and unfavorable total labor variance. D. Favorable labor efficiency variance and favorable materials quantity variance. E. None of the above, as all of these variance combinations are possible.
E. None of the above, as all of these variance combinations are possible.
Which of the following statements best describes the relationship between the sales-forecasting process and the master-budgeting process? A. The sales forecast is typically completed after completion of the master budget. B. The sales forecast is typically completed approximately halfway through the master-budget process. C. The sales forecast is typically completed before the master budget and has no impact on the master budget. D. The sales forecast is typically completed before the master budget and has little impact on the master budget. E. The sales forecast is typically completed before the master budget and has significant impact on the master budget.
E. The sales forecast is typically completed before the master budget and has significant impact on the master budget.
A formal budget program will almost always result in: A. higher sales. B. more cash inflows than cash outflows. C. decreased expenses. D. improved profits. E. a detailed plan against which actual results can be compared.
E. a detailed plan against which actual results can be compared.
An organization's budgets will often be prepared to cover: A. one month. B. one quarter. C. one year. D. periods longer than one year. E. all of the above.
E. all of the above.
If a company has an unfavorable direct-material quantity variance, then: A. the direct-material price variance is favorable. B. the total direct-material variance is unfavorable. C. the total direct-material variance is favorable. D. the direct-labor efficiency variance is unfavorable. E. any of the above variances can occur.
E. any of the above variances can occur.
A company's plan for the acquisition of long-lived assets, such as buildings and equipment, is commonly called a: A. pro-forma budget. B. master budget. C. financial budget. D. profit plan. E. capital budget.
E. capital budget.
Activity-based budgeting: A. begins with a forecast of products and services to be produced, and customers served. B. ends with a forecast of products and services to be produced, and customers served. C. parallels the flow of analysis that is associated with activity-based costing. D. reverses the flow of analysis that is associated with activity-based costing. E. is best described by choices "A" and "D" above.
E. is best described by choices "A" and "D" above.
The budgeting technique that focuses on different phases of a product such as planning and concept design, testing, manufacturing, and distribution and customer service is known as: A. cash-flow budgeting. B. zero-base budgeting. C. base budgeting. D. comprehensive budgeting. E. life-cycle budgeting.
E. life-cycle budgeting.
E-budgeting: A. often uses specialized software to streamline the budgeting process. B. is an Internet-based budgeting procedure. C. requires significant network security provisions. D. is becoming more commonplace as businesses expand their operations throughout the world. E. possesses all of the above attributes.
E. possesses all of the above attributes.
A statistical control chart is best used for determining: A. direct-material price variances. B. direct-labor variances. C. whether a variance is favorable or unfavorable. D. who should be held accountable for specific variances. E. whether a particular variance should be investigated.
E. whether a particular variance should be investigated.
