Question 1. Which of the following might be included as a disbursement on a cash budget?
Depriciation on Income taxes
factory equipment to be paid
A) Yes Yes
B) Yes No
C) No Yes
d) No No
A) A Above
B) B Above
C) C Above
D) D Above
Question 2. Thirty percent of Sharp Company’s sales are for cash and 70% are on account. Sixty percent of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following are budgeted sales data for the company:
January February March April
Total Sales $50,000 $60,000 $40,000 $30,000
Total cash receipts in April are expected to be:
A) $24,640
B) $35,200
C) $31,560
D) $33,640
Question 3. On January 1, Colver Company has 6,500 units of Product A on hand. During the year, the company plans to sell 15,000 units of Product A, and plans to have 5,000 units on hand at year end. How many units of Product A must be produced during the year?
A) 13,500
B) 16,500
C) 15,000
D) 20,000
Question 4. The selling and administrative expense budget of Ruffing Corporation is based on budgeted unit sales, which are 4,800 units for February. The variable selling and administrative expense is $8.10 per unit. The budgeted fixed selling and administrative expense is $71,520 per month, which includes depreciation of $16,800 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the February selling and administrative expense budget should be:
A) $38,880
B) $54,720
C) $110,400
D) $93,600
Question 5. The basic idea behind responsibility accounting is that top management is responsible for preparing detailed budgets by which the performance of middle and lower management will be evaluated.
Question 6. Under traditional standard costing, which of the following would commonly be included when setting a standard quantity for direct material?
An allowance for An allowance for
material wasted material rejected
during production during production
A) Yes Yes
B) Yes No
C) No Yes
D) No No
A) A above
B) B above
C) C above
D) D above
Question 7. The following direct labor information pertains to the manufacture of product Glu:
Time required to make one unit 2 direct labor hours
Number of direct labor workers 50 workers
Number of productive hrs/week, per worker 40 hours
Weekly wages per worker $500
Worker's benefits treated as direct labor costs 20% of wages
What is the standard direct labor cost per unit of product Glu?
A) $30
B) $24
C) $15
D) $12
Use the following information to answer 8 - 10
Stench Foods Company uses a standard cost system to collect costs related to the production of its garlic flavored yogurt. The garlic (materials) standards for each container of yogurt produced are 0.8 ounces of crushed garlic at a standard cost of $2.30 per ounce.
During the month of June, Stench purchased 75,000 ounces of crushed garlic at a total cost of $171,000. Stench used 64,000 of these ounces to produce 71,500 containers of yogurt.
Question 8. What is Stench’s materials price variance for the month of June?
A) $1,500 favorable
B) $15,640 unfavorable
C) $17,250 favorable
D) $23,800 favorable
Question 9. What is Stench’s materials quantity variance for the month of June?
A) $1,500 favorable
B) $15,640 unfavorable
C) $17,250 favorable
D) $23,800 favorable
Question 10. Assume that it takes 15 minutes of labor time to crush enough garlic to fill one container of yogurt. Because the smell of the garlic can be unbearable, workers are given (and they take it!) 10 minutes of break time every hour (i.e., 50 minutes of work, 10 minutes of break). How many minutes should Stench use as a standard quantity of labor time per container of yogurt?
A) 18.0
B) 16.2
C) 17.0
D) 17.5
Use the following information to answer 11 - 12
Holiday Chemical Company uses a standard cost system to collect costs related to the production of its “bowling ball” fruitcakes. The direct labor standard for each fruitcake is 1.25 hours at a standard cost of $11.00 per hour. During the month of November, Holiday’s fruitcake production used 9,820 direct labor hours at a total direct labor cost of $106,547. This resulted in production of 8,500 fruitcakes for November.
Question 11. What is Holiday’s labor rate variance for November?
A) $8,855 favorable
B) $1,473 favorable
C) $13,047 unfavorable
D) $14,520 unfavorable
Question 12. What is Holiday’s labor efficiency variance for November?
A) $8,855 favorable
B) $10,328 favorable
C) $13,047 unfavorable
D) $14,520 unfavorable
Question 13. When using a flexible budget, what will occur to fixed costs as the activity level increases within the relevant range?
A) fixed costs per unit will decrease.
B) fixed costs per unit will remain unchanged.
C) fixed costs per unit will increase.
D) fixed costs are not considered in flexible budgeting.
Question 14. A major disadvantage of static budgets is:
A) the difficulty in developing such budgets due to the high cost of gathering the necessary information.
B) the cost behavior pattern of manufacturing overhead, which is primarily fixed.
C) that the variances between actual and budget on a static budget result from comparing actual costs at one level of activity to budgeted costs at a different level of activity.
D) their length and complexity.
Question 15. Comparing actual results to a budget based on actual activity for the period is possible with the use of a:
A) monthly budget.
B) master budget.
C) flexible budget.
D) rolling budget.
Question 16. Last year, a department’s standard costing system reported an unfavorable variable overhead spending variance and an unfavorable volume variance. The denominator activity level selected for allocating overhead to the product was based on 80% of capacity. If 100% of capacity had been selected instead as the denominator level, how would the reported unfavorable spending and volume variances be affected?
Spending Variance Volume variance
A) Increased Unchanged
B) Increased Increased
C) Unchanged Increased
D) Unchanged Unchanged
A) A above
B) B above
C) C above
D) D above
Question 17. The overhead spending variance:
A) measures the variance in amount spent for fixed overhead items.
B) includes elements of waste or excessive usage as well as elements of price variance.
C) is generally considered to be the least useful of all overhead variances.
D) measures the difference between denominator activity and standard hours allowed.
Question 18. If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a(n):
A) favorable efficiency variance.
B) favorable spending variance.
C) unfavorable efficiency variance.
D) unfavorable spending variance.
Question 19. Variable overhead is applied on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:
A) favorable.
B) unfavorable.
C) zero.
D) indeterminable since it is not related to the labor efficiency variance.
Question 20. Alex Company has a large underapplied overhead balance in the manufacturing overhead account. This could be explained by:
A) an unfavorable volume variance, assuming all other variances are zero.
B) a favorable volume variance, assuming all other variances are zero.
C) standard hours allowed for the period’s output being greater than denominator hours for the period.
D) none of these.
Question 21. Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is:
A) Residual income can be computed without having to measure operating assets.
B) Managers are more likely to accept projects that are beneficial to the company.
C) ROI does not take into account both turnover and margin.
D) A minimum rate of return does not have to be specified when the residual income approach is used.
Question 22. Which of the following performance measures will decrease if the minimum required rate of return increases?
Return on Residual
Investment Income
A) Yes Yes
B) No Yes
C) Yes No
D) No No
A) A Above
B) B Above
C) C Above
D) D Above
Question 23. Which of the following performance measures will increase if inventory decreases and all else remains the same?
Return on Residual
Investment Income
A) Yes Yes
B) No Yes
C) Yes No
D) No No
A) A Above
B) B Above
C) C Above
D) D Above
Question 24. Some investment opportunities which should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:
A) return on investment.
B) residual income.
C) contribution margin.
D) segment margin.
Question 25. Given the following data:
Return on investment 25%
Sales $100,000
Average operating assets $40,000
Turnover 2.5
Minimum required rate of return 18%
Margin on sales 10%
The residual income would be:
A) $2,800
B) $0
C) $6,000
D) $8,000