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Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?
A. An increase in net operating income
B. An increase in operating assets
C. An increase in sales
D. A reduction in expenses
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
2. The activity variance for personnel expenses in December would be closest to
A. $2,361 U.
B. $71 F.
C. $71 U.D. $2,361 F.
3. Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating assets of $84,000 at the beginning of the year and $90,000 at the end of the year. What was the company's turnover rounded to the nearest tenth?
A. 9.5
B. 10.2
C. 9.2
D. 9.8
4. Coles Company, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:
August
14,000
units
September
14,500
units
October
15,500
units
November
12,600
units
December
11,900
units
The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement wasn't met because only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.
The total cost of Material K to be purchased in August is
A. $48,200.
B. $40,970.
C. $33,840.
D. $42,300.
5. The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable factory overhead is $5.00 per direct-labor hour; the budgeted fixed factory overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct-labor time for December is 8,000 hours, then total budgeted factory overhead per direct-labor hour (rounded) is
A. $9.38.
B. $16.25.
C. $14.38.
D. $12.50.
6. Vandall Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 7,300 units, but its actual level of activity was 7,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:
Data used in budgeting:
Fixed element Variable element
per month per unit
Revenue ___-___ $35.40
Direct labor 0 $3.30
Direct materials 0 15.90
Manufacturing overhead 49,200 1.20
Selling and
administrative expenses 26,600 0.10
Total expenses $75,800 $20.50
Actual results
for April:
Revenue $254,146
Direct labor $24,722
Direct materials $116,496
Manufacturing overhead $59,608
Selling and
administrative expenses $26,494
The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for April would be closest to
A. $6,740 F.
B. $6,144 F.
C. $6,740 U.
D. $6,144 U.
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
- Production of Fastgro: 4,000 bags
- Direct materials purchased: 85,000 pounds at a cost of $32,300
- Direct-labor worked: 390 hours at a cost of $4,875
- Variable overhead incurred: $1,475
- Inventory of direct materials on January 31: 3,000 pounds
7. The total variance (both rate and efficiency) for variable overhead for January is
A. $85 F.
B. $100 U.
C. $40 F.
D. $125 F.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
8. The spending variance for medical supplies in December would be closest to
A. $680 U.
B. $680 F.
C. $725 U.
D. $725 F.
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
- Production of Fastgro: 4,000 bags
- Direct materials purchased: 85,000 pounds at a cost of $32,300
- Direct-labor worked: 390 hours at a cost of $4,875
- Variable overhead incurred: $1,475
- Inventory of direct materials on January 31: 3,000 pounds
9. The labor rate variance for January is
A. $475 U.
B. $585 F.
C. $585 U.
D. $475 F.
10. There are various budgets within the master budget. One of these budgets is the production budget.
Which of the following best describes the production budget?
A. It details the required direct-labor hours.
B. It summarizes the costs of producing units for the budget period.
C. It details the required raw materials purchases.
D. It's calculated based on the sales budget and the desired ending inventory.
11. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $50,000 for Division A and had a contribution margin ratio of 30% in Division B, when sales in Division B were $200,000. Net operating income for the company was $25,000, and traceable fixed expenses were $40,000. Lyons Company's common fixed expenses were
A. $70,000.
B. $45,000.
C. $40,000.
D. $85,000.
Use the following information to answer this question.
The Adams Company, a merchandising firm, has budgeted its activity for November according to the following information:
- Sales were at $450,000, all for cash.
- Merchandise inventory on October 31 was $200,000.
- The cash balance on November 1 was $18,000.
- Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash.
- Budgeted depreciation for November is $25,000.
- The planned merchandise inventory on November 30 is $230,000.
- The cost of goods sold is 70% of the selling price.
- All purchases are paid for in cash.
12. The budgeted cash disbursements for November areA. $405,000.
B. $375,000.
C. $345,000.
D. $530,000.
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
- Production of Fastgro: 4,000 bags
- Direct materials purchased: 85,000 pounds at a cost of $32,300
- Direct-labor worked: 390 hours at a cost of $4,875
- Variable overhead incurred: $1,475
- Inventory of direct materials on January 31: 3,000 pounds
13. The materials price variance for January is
A. $1,700 F.
B. $1,640 F.
C. $1,640 U.
D. $1,300 U.
14. A company's average operating assets are $220,000, and its net operating income is $44,000. The company invested in a new project, increasing average assets to $250,000 and increasing its net operating income to $49,550. What is the project's residual income if the required rate of return is 20%?
A. ($600)
B. $450
C. ($450)
D. $600
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00 Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
- Production of Fastgro: 4,000 bags
- Direct materials purchased: 85,000 pounds at a cost of $32,300
- Direct-labor worked: 390 hours at a cost of $4,875
- Variable overhead incurred: $1,475
- Inventory of direct materials on January 31: 3,000 pounds
15. The materials quantity variance for January is
A. $750 F.
B. $800 U.
C. $300 U.
D. $300 F.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
16. The revenue variance for December would be closest to
A. $3,429 F.
B. $3,429 U.
C. $3,680 F.
D. $3,680 U.
17. Manufacturing Cycle Efficiency (MCE) is computed as
A. Process Time divided by Delivery Cycle Time.
B. Value-Added Time divided by Throughput Time.
C. Value-Added Time divided by Delivery Cycle Time.
D. Throughput Time divided by Delivery Cycle Time.
Use the following information to answer this question.
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expenses $9,508
Administrative expenses $4,772
18. The activity variance for personnel expenses in January would be closest to
A. $661 F.
B. $661 U.
C. $261 U.
D. $261 F.
19. The budget or schedule that provides necessary input data for the direct-labor budget is the
A. production budget.
B. schedule of cash collections.
C. raw materials purchases budget.
D. cash budget.
20. The cash budget must be prepared before you can complete the
A. schedule of cash disbursements.
B. budgeted balance sheet.End of exam
C. production budget.
D. raw materials purchases budget.