Question 1

Budgeted collections from customers in November total:

Accepted Answer

A)  $32,000. 
B)  $53,000. 
C)  $59,000. 
D)  $48,000. 
A)  $32,000. 
B)  $53,000. 
C)  $59,000. 
D)  $48,000.

Question 2

A master budget usually includes all of the following except:

Accepted Answer

A)  A sales forecast. 
B)  A cash budget. 
C)  A projected tax return. 
D)  Projected financial statements. 
A)  A sales forecast. 
B)  A cash budget. 
C)  A projected tax return. 
D)  Projected financial statements.

Question 3

Under the "total quality management" philosophy, budgeted amounts should be set at realistic and achievable levels rather than at levels representing absolute efficiency.

Accepted Answer

A) True 
 B)False

Question 4

A performance report prepared for September operations under a flexible budget approach would show:

Accepted Answer

A)  Actual costs under budget by $6,500. 
B)  Total costs per flexible budget of $215,000. 
C)  Actual costs under budget by $21,500. 
D)  Actual costs over budget by $15,000. 
A)  Actual costs under budget by $6,500. 
B)  Total costs per flexible budget of $215,000. 
C)  Actual costs under budget by $21,500. 
D)  Actual costs over budget by $15,000.

Question 5

Flexible budget-variances
The cost accountant for Bradley, Inc., prepared the following monthly performance report relating to the Finishing Department:
(a) Compute the amounts that should be included for each of the following in a flexible budget prepared for a 6,500-unit level of production:
(1) Direct materials: $________________
(2) Direct labor: $________________
(3) Fixed manufacturing overhead: $________________
(b) Assume that a revised performance report is prepared for the 6,500-unit level of production using a flexible budget approach. Compute the cost variances for each of the following. Indicate whether each variance is favorable (F) or unfavorable (U).

Accepted Answer

The answer of Flexible budget-variances
The cost accountant for Bradley, Inc.,...

Question 6

If the volume of output of a factory for the month of June is 50,000 units, while the budgeted output was 40,000 units:

Accepted Answer

A)  Comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget. 
B)  Actual fixed costs per unit may be expected to exceed budgeted levels. 
C)  Actual cost per unit will be higher than standard cost per unit. 
D)  Both total production costs and unit production costs should be approximately 25% above budgeted levels. 
A)  Comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget. 
B)  Actual fixed costs per unit may be expected to exceed budgeted levels. 
C)  Actual cost per unit will be higher than standard cost per unit. 
D)  Both total production costs and unit production costs should be approximately 25% above budgeted levels.

Question 7

Which of the following statements does not correctly describe relationships within the master budget? (More than one answer may be correct.)

Accepted Answer

A)  The production budgets are based in large part upon the sales forecast. 
B)  In many elements of the master budget, the amounts budgeted for the upcoming quarter are reviewed and subdivided into monthly budget figures. 
C)  The operating budgets affect the budgeted income statement, the cash budget, and the budgeted balance sheet. 
D)  The capital expenditures budget affects the direct materials budget. 
A)  The production budgets are based in large part upon the sales forecast. 
B)  In many elements of the master budget, the amounts budgeted for the upcoming quarter are reviewed and subdivided into monthly budget figures. 
C)  The operating budgets affect the budgeted income statement, the cash budget, and the budgeted balance sheet. 
D)  The capital expenditures budget affects the direct materials budget.

Question 8

A company's operating cycle is the time between purchases of direct materials and conversion of these materials back into cash.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a potential benefit of using budgets?

Accepted Answer

A)  Enhanced coordination of firm activities. 
B)  More motivated managers. 
C)  More accurate external financial statements. 
D)  Improved interdepartmental communication. 
A)  Enhanced coordination of firm activities. 
B)  More motivated managers. 
C)  More accurate external financial statements. 
D)  Improved interdepartmental communication.

Question 10

A flexible budget is one that:

Accepted Answer

A)  Is revised monthly in the light of changing business conditions. 
B)  Is a compromise plan reflecting diverse views of various supervisors. 
C)  Contains estimated cost data for several different levels of activity. 
D)  Separates factory overhead between the variable and fixed portions. 
A)  Is revised monthly in the light of changing business conditions. 
B)  Is a compromise plan reflecting diverse views of various supervisors. 
C)  Contains estimated cost data for several different levels of activity. 
D)  Separates factory overhead between the variable and fixed portions.

Question 11

A master budget is a comprehensive financial plan setting forth the financial and operational goals of a business.

Accepted Answer

A) True 
 B)False

Question 12

A performance report can be easily adjusted to show budgeted revenues and costs at different levels of activity.

Accepted Answer

A) True 
 B)False

Question 13

A budget prepared using the total quality management approach is always achievable by departments within a company.

Accepted Answer

A) True 
 B)False

Question 14

If the total quality management approach is employed to determine the level at which budgeted amounts are set, then absolute efficiency is assumed.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not normally a characteristic of a profit rich, cash poor company?

Accepted Answer

A)  Low inventory turnover. 
B)  High accounts receivable turnover. 
C)  High operating income, but low cash flow from operations. 
D)  A long operating cycle. 
A)  Low inventory turnover. 
B)  High accounts receivable turnover. 
C)  High operating income, but low cash flow from operations. 
D)  A long operating cycle.

Question 16

Aron Company makes computer screens, Model 1 and Model 2. Aron anticipates selling the screens as follows:
The inventory on 1/1/12 is 2500 units of Model 1 and 3000 units of Model 2. Aron wants to have on hand 45% of the anticipated sales of the following month for each model. Prepare a production budget for the first 3 quarters of 2012 for both models.
 $$\begin{array} { | l | c | c | } 
\hline & \text { Unit of } & \text { Units of } \
\hline & \text { Model 1 } & \text { Model 2 } \
\hline \text { Quarter ending 3/31 } & 5,000 & 6,000 \
\hline \text { Quarter ending 6/30 } & 4,500 & 5,500 \
\hline \text { Quarter ending 9/30 } & 5,500 & 6,500 \
\hline \text { Quarter ending 12/31 } & 6,000 & 7,000 \
\hline
\end{array}$$

Accepted Answer

The answer of Aron Company makes computer screens, Model 1...

Question 17

Costs that rise and fall proportionately with the volume of output are often referred to as:

Accepted Answer

A)  Variable costs. 
B)  Flexible costs. 
C)  Idle capacity costs. 
D)  Uncontrollable costs. 
A)  Variable costs. 
B)  Flexible costs. 
C)  Idle capacity costs. 
D)  Uncontrollable costs.

Question 18

Harding Company expected sales to be 50,000 units in February, 45,000 in March, and 55,000 units in April. Each unit sells for $18.00 each. The following costs pertain to each unit:
Harding is considering an advertising campaign which will cost $15,000 per month from January to March and is expected to increase sales by 8% a month. At the same time Harding will reduce sales prices to $17.00 per unit while keeping costs steady.
Required:
(A.) What will operating income be in each of the three months before the advertising campaign?
(B.) If Harding goes ahead with the advertising campaign, how much would operating income increase or decrease each month? Would you advise them to go ahead with the campaign?
 $$\begin{array} { | l | l | l | } 
\hline \text { Direct labor } & \$ 5.00 & \
\hline \text { Direct Materials } & \$ 3.00 & \
\hline \text { Variable overhead } & \$ 1.75 & \
\hline \begin{array} { l } 
\text { Total fixed } \
\text { overhead }
\end{array} & \$ 45,000 & \text { a month } \
\hline
\end{array}$$

Accepted Answer

Total operating income for the

Question 19

Production and purchases budgets
Brian Furniture, Inc. manufactures a variety of desks, chairs, tables, and shelf units which are sold to public school systems throughout the Midwest. The controller of the company's School Desk Division is currently preparing a budget for the second quarter of 2012. The following sales forecast has been developed by the division's sales manager:
The inventory of finished desk and chair sets at the end of each month must be equal to 30% of the budgeted sales for the next month. On April 1, there will be 1,950 units of desk and chair sets on hand.
Work-in-process inventories are negligible and can be safely ignored.
Each desk and chair set requires 10 board feet of pine planks. Pine planks cost $0.75 per board foot, and the division ends each month with enough pine to cover 20% of the next month's production requirements. This requirement will be met on April 1 of 2012.
Required. Prepare a production budget and a materials purchases budget for April, May, and June and in total for the three-month period.

Accepted Answer

The answer of Production and purchases budgets
Brian Furniture, Inc. manufactures...

Question 20

The sales forecast directly affects many elements of the master budget. Which of the following would be least affected by short-term fluctuations in the sales forecasts?

Accepted Answer

A)  The production schedule. 
B)  The budgeted income statement. 
C)  The capital expenditures budget. 
D)  The operating expense budget. 
A)  The production schedule. 
B)  The budgeted income statement. 
C)  The capital expenditures budget. 
D)  The operating expense budget.

Exam 23: Operational Budgeting

Budgeted collections from customers in November total:

A master budget usually includes all of the following except:

Under the "total quality management" philosophy, budgeted amounts should be set at realistic and achievable levels rather than at levels representing absolute efficiency.

A performance report prepared for September operations under a flexible budget approach would show:

If the volume of output of a factory for the month of June is 50,000 units, while the budgeted output was 40,000 units:

Which of the following statements does not correctly describe relationships within the master budget? (More than one answer may be correct.)

A company's operating cycle is the time between purchases of direct materials and conversion of these materials back into cash.

Which of the following is not a potential benefit of using budgets?

A flexible budget is one that:

A master budget is a comprehensive financial plan setting forth the financial and operational goals of a business.

A performance report can be easily adjusted to show budgeted revenues and costs at different levels of activity.

A budget prepared using the total quality management approach is always achievable by departments within a company.

If the total quality management approach is employed to determine the level at which budgeted amounts are set, then absolute efficiency is assumed.

Which of the following is not normally a characteristic of a profit rich, cash poor company?

Costs that rise and fall proportionately with the volume of output are often referred to as:

The sales forecast directly affects many elements of the master budget. Which of the following would be least affected by short-term fluctuations in the sales forecasts?

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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