Question 1

When an organization's actual revenues are greater than its budgeted revenues, the difference is referred to as a favourable variance.

Accepted Answer

A) True 
 B)False

Question 2

(Appendix 10A) Gold Company has the following balances at December 31, 20x4: Cash $6,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December); merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only). Budgeted sales follow: $$\begin{array} { l r } 
\text { January } & \$ 50,000 \
\text { February } & 90,000 \
\text { March } & 60,000 \
\text { April } & 100,000
\end{array}$$ Other data:
*Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales.
*Cost of goods sold is 40% of sales.
*Ending inventory must be 140% of the next month's cost of sales.
*Purchases are paid 70% in month of purchase and 30% in the following month.
*The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for amortization.
*All costs are paid in the month incurred.
*Minimum cash balance requirement is $6,000.
What is the budgeted cost of purchases for February?

Accepted Answer

A)  $19,200 
B)  $30,400 
C)  $15,000 
D)  $52,800 
A)  $19,200 
B)  $30,400 
C)  $15,000 
D)  $52,800

Question 3

Which of the following must managers develop prior to preparing a budgeted income statement?

Accepted Answer

A)  Cash budget 
B)  Budgeted balance sheet 
C)  Support department budgets 
D)  Support department cost allocations 
A)  Cash budget 
B)  Budgeted balance sheet 
C)  Support department budgets 
D)  Support department cost allocations

Question 4

One objective of budgeting is motivating managers to:

Accepted Answer

A)  Eliminate variances 
B)  Use resources efficiently 
C)  Lessen the need for communication 
D)  Establish prices for external sales of goods and services 
A)  Eliminate variances 
B)  Use resources efficiently 
C)  Lessen the need for communication 
D)  Establish prices for external sales of goods and services

Question 5

TFS Corporation, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: $$\begin{array} { l r } 
\text { January } & \$ 50,000 \
\text { February } & 90,000 \
\text { March } & 60,000 \
\text { April } & 100,000
\end{array}$$ TFS' budgeted cost of goods sold for the next fiscal year will be:

Accepted Answer

A)  $25,000 
B)  $35,000 
C)  $21,000 
D)  $28,000 
A)  $25,000 
B)  $35,000 
C)  $21,000 
D)  $28,000

Question 6

Kaizen budgets:

Accepted Answer

A)  Are the same as traditional budgets 
B)  Include cost reduction and quality improvements in the budgeting process 
C)  Are prepared month by month 
D)  Do not include revenues 
A)  Are the same as traditional budgets 
B)  Include cost reduction and quality improvements in the budgeting process 
C)  Are prepared month by month 
D)  Do not include revenues

Question 7

Planning Systems, Inc. has forecast the following unit sales and production for the next year, by quarter: $$\begin{array} { l l l l l } 
& 1 ^ { \text {st } } & 2 ^ { \text {nd } } & 3 ^ { \text {rd } } & 4 ^ { \text {th } } \
\text { Production } & 150 & 160 & 140 & 100 \
\text { Sales } & 120 & 140 & 150 & 120
\end{array}$$ The firm has beginning inventories as follows: $$\begin{array} { l l } 
\text { Finished goods } & 50 \text { units } \
\text { Direct material A } & 100 \
\text { Direct material B } & 100
\end{array}$$
A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories.
What is the ending finished goods inventory for quarter 2?

Accepted Answer

A)  50 
B)  70 
C)  80 
D)  100 
A)  50 
B)  70 
C)  80 
D)  100

Question 8

(Appendix 10A) Conner Company is a medium-sized toy distributor. Experience has shown that 30% of sales are collected within the month of sale, 60% is collected the month after the sale, and 10% is collected two months after the sale. Inventory on hand at the end of a month is to be 70% of the next month's budgeted sales. Cost of goods sold is 50% of the selling price. Payment for purchases is made in the month after purchase. All other costs are paid in the month incurred. Budgeted amounts are as follows: $\begin{array}{ccccccc}
&\text { March}&\text {  April }&\text { May }&\text { June}&\text {  July }&\text { August}\
 \text { Sales } & \$ 10,000 & \$ 20,000 & \$ 30,000 & \$ 30,000 & \$ 50,000 & \$ 40,00 \
 \text {Cost}&&&&&\
 \text { Wages } & & & 1,500 & 2,000 & 2,500 & 1,500 \
 \text { Rent } & & & 500 & 500 & 500 & 500 \
 \text { Other } & & & 400 & 500 & 600 & 500 \

\end{array}$
 Total cash disbursements in August are expected to be:

Accepted Answer

A)  $24,000 
B)  $45,500 
C)  $21,500 
D)  $31,000 
A)  $24,000 
B)  $45,500 
C)  $21,500 
D)  $31,000

When an organization's actual revenues are greater than its budgeted revenues, the difference is referred to as a favourable variance.

Which of the following must managers develop prior to preparing a budgeted income statement?

One objective of budgeting is motivating managers to:

Kaizen budgets:

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Filters

Exam 10: Static and Flexible Budgets

When an organization's actual revenues are greater than its budgeted revenues, the difference is referred to as a favourable variance.

Which of the following must managers develop prior to preparing a budgeted income statement?

One objective of budgeting is motivating managers to:

Kaizen budgets:

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Filters