Question 1

What does the budget committee do?

Accepted Answer

A) It has the responsibility to generate the budget. 
B) It resolves differences that may arise as the budget is prepared. 
C) It prepares financial statements for the auditor. 
D) It ensures that the budgets comply with IFRS. 
A) It has the responsibility to generate the budget. 
B) It resolves differences that may arise as the budget is prepared. 
C) It prepares financial statements for the auditor. 
D) It ensures that the budgets comply with IFRS.

Question 2

Smithson Corporation has the following budgeted sales for the selected six-month period:
 $$\begin{array} { l c } 
\text { Month } & \text { Unit sales } \
\text { June } & 15,000 \
\text { Juy } & 20,000 \
\text { August }  & 35,000 \
\text { September }& 25,000 \
\text { Octaber }  & 30,000 \
\text { November}& 20,000
\end{array}$$ There were 7,500 units of finished goods in inventory at the beginning of June.Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month.
Three kilograms of materials are required for each unit produced.Each kilogram of material costs $20.Inventory levels for materials equal 30 percent of the needs for the next month.Materials inventory on June 1 was 5,000 kilograms. 
a.Prepare production budgets in units for July,August,and September.
b.Prepare a purchases budget in pounds and dollars for July,August,and September.

Accepted Answer

The answer of Smithson Corporation has the following budgeted sales...

Question 3

What is characteristic of activity-based budgets?

Accepted Answer

A) They use the knowledge of cost behaviour to split the functional-based line items into fixed and variable components. 
B) They start with output and then determine the resources necessary to create that output. 
C) They rely on the use of functional-based line items. 
D) They work in environments where the products are homogenous and the production process is simple. 
A) They use the knowledge of cost behaviour to split the functional-based line items into fixed and variable components. 
B) They start with output and then determine the resources necessary to create that output. 
C) They rely on the use of functional-based line items. 
D) They work in environments where the products are homogenous and the production process is simple.

Question 4

Bug Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
-Refer to the figure.How many units of wood are expected to be used in production during the second month?

Accepted Answer

A) 10,000 
B) 12,000 
C) 12,500 
D) 15,000 
A) 10,000 
B) 12,000 
C) 12,500 
D) 15,000

Question 5

What does the ideal budget system create in managers?

Accepted Answer

A) goal congruence and extreme caution 
B) drive and risk avoidance 
C) goal congruence and drive 
D) drive and extreme caution 
A) goal congruence and extreme caution 
B) drive and risk avoidance 
C) goal congruence and drive 
D) drive and extreme caution

Question 6

Miller Corporation has the following sales budget for the first four months:
Month Sales
$\begin{array}{lr}
\text { Month } &{\text { Sales }} \
\text { January } & \$ 400,000 \
\text { February } & 320,000 \
\text { March } & 440,000 \
\text { April } & 360,000
\end{array}$ 
Historically,the following trend has been established regarding cash collection of sales:
65 percent in month of sale
25 percent in month following sale
8 percent in second month following sale
2 percent uncollectible
The company allows a 2 percent cash discount for payments made by customers during the month of the sale.November and December sales were $400,000 and $240,000,respectively.
Prepare a schedule of budgeted cash collections from sales for January,February,and March.

Accepted Answer

None

Question 7

Jordan Manufacturing Company expects to incur the following per-unit costs for 1,000 units of production: $$\begin{array} { l l } 
\text { Direct materils } & 3 \mathrm { lb } \text { @ } \$ 5 = \$ 15 \
\text { Direct labou } & 1 \mathrm { hr } @ \$ 6 = \$ 6 \
\text { Variable overhead } & 75 \% \text { of direct labour costs } \
\text { Fixed overhead } & 50 \% \text { of direct labour costs }
\end{array}$$
- What is the total amount of overhead included in the overhead budget?

Accepted Answer

A) $3,000 
B) $4,500 
C) $7,500 
D) $11,250 
A) $3,000 
B) $4,500 
C) $7,500 
D) $11,250

Question 8

Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed:
$$\begin{array} { l l } 
\text { Activit } & \text { Cost Formula } \
\hline \text { Maintenance } & \$ 15,000 + \$ 4 \text { per machine hour } \
\text { Machiring } & \$ 35,000 + \$ 1 \text { per machine hour } \
\text { Inspection } & \$ 60,000 + \$ 750 \text { per batch } \
\text { Setups } & \$ 1,000 \text { per batch } \
\text { Purchasing } & \$ 50,000 + \$ 10 \text { per purchase order }
\end{array}$$
-Refer to the figure.What is the budgeted inspection cost if there was production of 50,000 reflectors that will require 8,000 machine hours,25 batches,and 15,000 purchase orders?

Accepted Answer

A) $18,750 
B) $60,000 
C) $66,000 
D) $78,750 
A) $18,750 
B) $60,000 
C) $66,000 
D) $78,750

Question 9

Define budgeting and control.How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?

Accepted Answer

Budgets are the quantitative expressions

Question 10

Which of the following exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility?

Accepted Answer

A) realistic standards 
B) monetary incentives 
C) budgetary slack 
D) management by exception 
A) realistic standards 
B) monetary incentives 
C) budgetary slack 
D) management by exception

Question 11

Johnson Company has the following projected account balances for September 30:
$\begin{array}{lrlr}
\text { Accounts payable } & \$ 20,000 & \text { Sales } & \$ 400,000 \
\text { Accounts receivable } & 50,000 & \text { Capital stock } & 200,000 \
\text { Depreciation, factory } & 12,000 & \text { Retained earnings } & ? ? ? \
\text { Inventories }(8 / 31) & 90,000 & \text { Maintenance, factory } & 14,000 \
\text { Inventories }(9 / 30) & 90,000 & \text { Cash } & 28,000 \
\text { Materials used } & 100,000 & \text { Equipment, net } & 120,000 \
\text { Office expenses } & 40,000 & \text { Buildings, net } & 200,000 \
\text { Insurance, factory } & 2,000 & \text { Utilities, factory } & 8,000 \
\text { Factory wages } & 70,000 & \text { Selling expenses } & 30,000 \
\text { Bonds payable } & 80,000 & &
\end{array}$
 
a.Prepare a budgeted income statement for September.
b.Prepare a budgeted balance sheet as of September 30.

Accepted Answer

None

Question 12

Freedom Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000.
Accounts receivable on December 31 were $45,000.
-Refer to the figure.What are the expected cash collections of Freedom Manufacturing Company for March?

Accepted Answer

A) $64,500 
B) $69,600 
C) $90,000 
D) $114,600 
A) $64,500 
B) $69,600 
C) $90,000 
D) $114,600

Question 13

Armati, Inc., is looking for feedback on companyperformance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, Inc., had the following budgeted data:
$\begin{array}{lr}
\text { Unit sales } & 26,000 \
\text { Unit production } & 26,000 \
& \
\text { Budgeted fixed overhead: } & \$ 800 \
\text { Supervision } & 2,000 \
\text { Depreciation } & 100 \
\text { Rent } & 1800
\end{array}$

$\begin{array}{llr}
  \text {Budgeted variable costs per unit:  } &\
 \text {  Direct materials} &\$0.15\
 \text { Direct labour } &0.20\
 \text { Supplies } &0.02\
 \text { Indirect labour } &0.05\
\text{Power}&0.02
\end{array}$
 $\begin{array}{llr}
  \text {  Actual unit sales} &24,000\
 \text {Actual unit production  } &28,000\
\
 \text {  Actual fixed overhead:} &\
 \text { Supervision } &\$850\
 \text { Depreciation } &2,000\
 \text {  Rent} &100\
\end{array}$

$\begin{array}{llr}
  \text { Actual variable costs: } &\
 \text {Direct materials  } &\$3,500\
 \text {  Direct labour} &4,900\
 \text {Supplies  } &530\
 \text {  Indirect labour} &1,250\
 \text {Power  } &470\
\end{array}$

-Refer to the figure.What was the actual cost for direct materials?

Accepted Answer

A) $3,500 
B) $3,600 
C) $3,900 
D) $4,500 
A) $3,500 
B) $3,600 
C) $3,900 
D) $4,500

Question 14

Freedom Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000.
Accounts receivable on December 31 were $45,000.
-Refer to the figure.What would Freedom Manufacturing Company expect to have as an accounts receivable balance on March 31?

Accepted Answer

A) $39,600 
B) $45,000 
C) $55,500 
D) $90,000 
A) $39,600 
B) $45,000 
C) $55,500 
D) $90,000

Question 15

Which of the following is NOT a potential disadvantage of participative budgeting?

Accepted Answer

A) pseudo participation 
B) performance feedback 
C) unrealistic standards 
D) budgetary slack 
A) pseudo participation 
B) performance feedback 
C) unrealistic standards 
D) budgetary slack

Question 16

When does myopic behaviour occur?

Accepted Answer

A) when actions improve budgetary performance in the shortrun but are harmful in the long run 
B) when there is uncertainty 
C) when there is focus on immediate costs 
D) when actions improve budgetary performance in the distant time horizon 
A) when actions improve budgetary performance in the shortrun but are harmful in the long run 
B) when there is uncertainty 
C) when there is focus on immediate costs 
D) when actions improve budgetary performance in the distant time horizon

Question 17

Which of the following is NOT a component of the cash budget?

Accepted Answer

A) sales forecast 
B) cash disbursements 
C) financing 
D) cash excess or deficiency 
A) sales forecast 
B) cash disbursements 
C) financing 
D) cash excess or deficiency

Question 18

Bug Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
-Refer to the figure.How many units of steel are expected in the material inventory at the end of the second month?

Accepted Answer

A) 30 
B) 35 
C) 40 
D) 45 
A) 30 
B) 35 
C) 40 
D) 45

Question 19

Freedom Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000.
Accounts receivable on December 31 were $45,000.
-Refer to the figure.How many dollars are expected to be collected in December?

Accepted Answer

A) $23,500 
B) $26,500 
C) $30,500 
D) $37,000 
A) $23,500 
B) $26,500 
C) $30,500 
D) $37,000

Question 20

If production was budgeted at 400 units and the actual production was 420 units,what would be the flexible budget variance for materials if the actual cost of materials was $4,150 and the budgeted cost per unit is $10?

Accepted Answer

A) $50 F 
B) $100 F 
C) $150 U 
D) $200 U 
A) $50 F 
B) $100 F 
C) $150 U 
D) $200 U

What does the budget committee do?

What is characteristic of activity-based budgets?

What does the ideal budget system create in managers?

Define budgeting and control.How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?

Which of the following exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility?

Which of the following is NOT a potential disadvantage of participative budgeting?

When does myopic behaviour occur?

Which of the following is NOT a component of the cash budget?

If production was budgeted at 400 units and the actual production was 420 units,what would be the flexible budget variance for materials if the actual cost of materials was $4,150 and the budgeted cost per unit is $10?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Filters

Exam 8: Budgeting for Planning and Control

What does the budget committee do?

What is characteristic of activity-based budgets?

What does the ideal budget system create in managers?

Define budgeting and control.How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?

Which of the following exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility?

Which of the following is NOT a potential disadvantage of participative budgeting?

When does myopic behaviour occur?

Which of the following is NOT a component of the cash budget?

If production was budgeted at 400 units and the actual production was 420 units,what would be the flexible budget variance for materials if the actual cost of materials was $4,150 and the budgeted cost per unit is $10?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Filters