Question 1

A budget that is based on only one estimate of production or sales volume is a:

Accepted Answer

A)  Fixed budget 
B)  Standard budget 
C)  Static budget 
D)  Flexible budget

Question 2

Exhibit 18-10 Streamer Company sells float-tubes for recreational fly-fishing. A review of the company's historical operations shows that gross margin consistently averages 40% of sales. Company guidelines indicate that ending inventory at the end of any quarter should always be 25% of the next quarter's budgeted cost of goods sold. The expected sales for Streamer's next four quarters are shown below.
 
-Refer to Exhibit 18-10. If Streamer prepares a pro-forma income statement for the first quarter, what amount would be shown for purchases (assume the year end inventory balance is $120,000)?

Accepted Answer

A)  $800,000 
B)  $581,000 
C)  $502,500 
D)  $457,500

Question 3

The overall purpose of a budget is to:

Accepted Answer

A)  Develop a plan to meet a specified goal 
B)  Determine disposable income 
C)  Allow ongoing comparison between actual results and a specified plan 
D)  To develop a plan to meet specified goals and allow ongoing comparison between actual results and a specified plan

Question 4

Exhibit 18-7 Cedar Corporation uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows:
 Fixed overhead costs per month are:
 
-Refer to Exhibit 18-7. If Cedar prepares a flexible budget for 6,000 direct labor hours, what amount will this budget show for total manufacturing overhead costs?

Accepted Answer

A)  $12,800 
B)  $126,000 
C)  $134,000 
D)  $138,800

Question 5

Which of the following budgets contains the labor costs involved directly in providing the service for a service firm?

Accepted Answer

A)  Supplies budget 
B)  Revenue budget 
C)  Overhead budget 
D)  Wages and salaries budget

Question 6

Exhibit 18-3 Thorne Chemicals makes cleaning solution. The following information is available on December 1, 2011:

-Refer to Exhibit 18-3. Given the information above, budgeted production for December is:

Accepted Answer

A)  97 gallons 
B)  115 gallons 
C)  142 gallons 
D)  178 gallons

Question 7

The format of the merchant's purchases budget is very similar to the format of the manufacturer's:

Accepted Answer

A)  Direct labor budget 
B)  Sales budget 
C)  Production budget 
D)  Manufacturing overhead budget

Question 8

Exhibit 18-7 Cedar Corporation uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows:
 Fixed overhead costs per month are:
 
-Refer to Exhibit 18-7. If Cedar prepares a flexible budget for 4,000 direct labor hours, what amount will this budget show for variable manufacturing overhead costs?

Accepted Answer

A)  $8,400 
B)  $42,000 
C)  $84,000 
D)  $109,600

Question 9

NewGen Computers is preparing its budget for 2011. Sales for the year are budgeted at $1,000,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $800,000. These expenditures include $25,000 for depreciation and $497,000 for variable manufacturing overhead. Given this information, total cash inflows from sales for 2011 would be:

Accepted Answer

A)  $800,000 
B)  $680,000 
C)  $480,000 
D)  $455,000

Question 10

Exhibit 18-6 The July manufacturing overhead budget of Kyoto Corporation, shown below, was constructed assuming an activity level of 48,000 direct labor hours:

- Refer to Exhibit 18-6. If management prepared a flexible budget for July using 40,000 direct labor hours, what amount would this flexible budget show for total variable costs?

Accepted Answer

A)  $76,000 
B)  $83,600 
C)  $87,200 
D)  $91,200

Question 11

Exhibit 18-5 Dr. Gatten began practicing dentistry on January 1, 2011. During January she served 250 patients who had their teeth examined and cleaned. The following information is known in relation to each patient visit:
 
-Refer to Exhibit 18-5. Given the information above, total service cost per patient served in January would be:

Accepted Answer

A)  $79.50 
B)  $69.50 
C)  $62.50 
D)  $57.00

Question 12

Which of the following budgets contains the supplies needed to operate for a service firm?

Accepted Answer

A)  Supplies budget 
B)  Revenue budget 
C)  Overhead budget 
D)  Wages and salaries budget

Question 13

For 2011, Raster Graphics forecasts cash receipts of $405,000 and cash disbursements of $430,000. If the beginning cash balance is $35,000 and the desired ending balance is $21,000, how much must Raster borrow during the year?

Accepted Answer

A)  $0 
B)  $10,000 
C)  $11,000 
D)  $25,000

Question 14

If a company plans to sell 77,000 units of product but sells 132,000 units, the most appropriate comparison of the cost data associated with the sales can be done using a budget based on which of the following number of units?

Accepted Answer

A)  33,000 
B)  77,000 
C)  132,000 
D)  209,000

Question 15

Exhibit 18-6 The July manufacturing overhead budget of Kyoto Corporation, shown below, was constructed assuming an activity level of 48,000 direct labor hours:

- Refer to Exhibit 18-6. If management prepared a flexible budget for July using 54,000 direct labor hours, what amount would this flexible budget show for indirect labor?

Accepted Answer

A)  $102,600 
B)  $54,000 
C)  $48,000 
D)  $27,000

Question 16

Operating budgets:

Accepted Answer

A)  Quantify management's objectives 
B)  Assist in coordinating activities of the business segments 
C)  Are benchmarks against which performance is measured 
D)  All of these are correct

Question 17

Kittitas Company provided the following budgeted information for the month:
 
Assuming the budgeted information provided is for an activity level of 10,000 units, prepare a flexible budget for 8,000, 10,000 and 12,000 units.

Accepted Answer

The answer of Kittitas Company provided the following budgeted information...

Question 18

Exhibit 18-9 Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead.
-
Refer to Exhibit 18-9. If the desired ending cash balance is $45,000, how much must Winthrop borrow during the year?

Accepted Answer

A)  $187,500 
B)  $142,500 
C)  $225,000 
D)  $180,000

Question 19

Which of the following accumulates all the costs for direct materials, direct labor and manufacturing overhead?

Accepted Answer

A)  Production budget 
B)  Budgeted product cost sheet 
C)  Sales budget 
D)  Selling and administrative expense budget

Question 20

Flexible budgeting can be used with which of the following types of manufacturing costs?

Accepted Answer

A)  Direct labor 
B)  Direct materials 
C)  Manufacturing overhead 
D)  All of these are correct

Exam 18: Budgeting and Control