Question 1

Villafane, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed:
$$\begin{array} { l l } 
\underline{\text { Activity }} &\underline{ \text { Cost Formula }} \
\text { Design}& \$ 5,000 + \$ 0.05 \text { per machine hour } \
\text { Machining} & \$ 25,000 + \$ 0.01 \text { per machine hour } \
\text { Setups} & \$ 35 \text { per batch } \
\text { Purchasing } & \$ 50 + \$ 15 \text { per purchase order }
\end{array}$$

Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders
$\begin{array} { l r } \text { Design } & \$ 5,080 \ \text { Machining } & ? \ \text { Setups } & ? \ \text { Purchasing } & \$ 600 \end{array}$

The following variances were given in the activity performance report:
$\begin{array}{lr}
\text { Design } & ? \
\text { Machining } & \$ 40 \mathrm{~F} \
\text { Setups } & \$ 15 \mathrm{~F} \
\text { Purchasing } & ?
\end{array}$
-Refer to the figure.The following variances were given in the activity performance report: $\begin{array}{llr}
  \text { Design } &?\
 \text { Machining } &\$40F\
 \text {Setups  } &\$15 F\
 \text {  Purchasing} &?
\end{array}$
 What is the actual cost of setups?

Accepted Answer

A) $160 
B) $190 
C) $300 
D) $400

Question 2

General Corporation manufactures boxes.The estimated number of boxes sold for the first three months are as follows: 
$\begin{array}{ll}
\text { Month } & \text { Sales } \
\hline \text { January } & 3,000 \
\text { February } & 4,200 \
\text { March } & 3,900
\end{array}$ 
Finished goods inventory at the end of December was 900 units.Ending finished goods inventory is equal to 20 percent of the next month's sales.General Corporation expects to sell the boxes for $5 each.April sales are projected at 4,500 boxes.
- 
How many boxes should be produced in January?

Accepted Answer

A) 2,940 boxes 
B) 3,000 boxes 
C) 3,060 boxes 
D) 3,840 boxes

Question 3

Van Gogh Inc.is constructing its marketing budget.
$\begin{array}{lcccc}
&\text { 1st quarter } & \text { 2nd quarter } & \text { 3rd quarter } & \text { 4th quarter }\
\text { Sales } & 30,000 & 40,000 & 50,000 & 60,000 \
\text { Production } & 35,000 & 45,000 & 55,000 & 65,000
\end{array}$
Commissions are $3 per unit sold.Salesperson salaries are $100,000 per quarter.Depreciation is $25,000 per quarter.Travel is $10,000 per quarter.Advertising is $50,000 in the first quarter; $40,000 in the second quarter; $60,000 in the third quarter; and $55,000 in the fourth quarter.What is the budgeted marketing expense for the third quarter?
a.$345,000
b.$360,000
c.$735,000
d.$795,000

Accepted Answer

The answer of Van Gogh Inc.is constructing its marketing budget.
\(\begin{array}{lcccc}
&\text...

Question 4

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 purchasing 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) $100,000 
B) $150,000 
C) $200,000 
D) $161,000

Question 5

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 is the flexible budget variance for supervision?

Accepted Answer

A) $50 F 
B) $50 U 
C) $67 F 
D) $67 U

Question 6

If production was budgeted at 400 units and the actual production was 420 units,what would be the static 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

Question 7

Oriental Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of the current year is as follows:
$$\begin{array} { l l } 
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units.Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales.Oriental Lamp expects to sell the lamps for $25 each.January of the following year sales is projected at 16,000 lamps.
-Refer to the figure.In going from the sales budget to the production budget,what should adjustments to the sales budget be made for?

Accepted Answer

A) finished goods inventories 
B) cash receipts 
C) factory overhead costs 
D) selling expenses

Question 8

Sandy Corporation has a sales budget for next month of $50,000.Cost of goods sold is expected to be 60 percent of sales.All goods are purchased in the month used and paid for in the month following their purchase.The beginning inventory of merchandise is $1,500 and an ending inventory of $2,000 is desired.Beginning accounts payable is $13,000. What should be the ending accounts payable for Sandy Corporation?

Accepted Answer

A) $13,000 
B) $29,500 
C) $30,000 
D) $30,500

Question 9

Campbell, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels.
Campbell had the following budgeted data:
$\begin{array}{llr}
  \text { Budgeted variable costs per unit  } &\
 \text {Direct materials  } &\$7.00\
 \text {Direct labour  } &10.00\
 \text { Supplies } &1.00\
 \text { Indirect labour } &0.50\
 \text { Power } &0.05\
\end{array}$

$\begin{array}{l}
\text { Budgeted fixed overhead for } 2011 \
\text { Supervision } & \$ 4,000 \
\text { Depreciation } & 3,000 \
\text { Rent } & 2000
\end{array}$
-Refer to the figure.What are the budgeted costs for rent if 5,000 units were produced?

Accepted Answer

A) $2,000 
B) $9,000 
C) $45,000 
D) $100,000

Question 10

Which of the following is NOT a responsibility of the budget committee?

Accepted Answer

A) prepare financial statements 
B) provide policy guidelines 
C) provide budgeting goals 
D) resolve differences that may arise as the budget is prepared

Question 11

When is activity-based budgeting most useful?

Accepted Answer

A) when output is homogeneous 
B) when production processes are simple 
C) when diverse products are produced 
D) when volume levels are stable

Question 12

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 is the static budget variance for supervision?

Accepted Answer

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

Question 13

Jordan Manufacturing Company expects to incur the following per-unit costs for 1,000 units of production: $\begin{array}{ll}
  \text {Direct materials  } &  \text { $ 3 \mathrm{lb} @ \$ 5=\$ 15 $ } \
  \text { Direct labour } &  \text {  1 hr $ \$ 6=\$ 6 $} \
  \text { Variable overhead } &  \text {  $ 75 \% $ of direct labour costs} \
  \text { Fized overhead } &  \text {$ 50 \% $ of direct labour costs  } \
\end{array}$

-What is the total amount of direct labour included in the direct labour budget?

Accepted Answer

A) $6 
B) $6,000 
C) $7,500 
D) $28,500

Question 14

What is the definition of a flexible-based budgeting system?

Accepted Answer

A) It uses functional-based line items. 
B) It splits costs into variable and fixed components. 
C) It provides costs for a variety of activity levels. 
D) It develops budgets around a single expected level of activity.

Question 15

General Corporation manufactures boxes.The estimated number of boxes sold for the first three months are as follows: 
$\begin{array}{ll}
\text { Month } & \text { Sales } \
\hline \text { January } & 3,000 \
\text { February } & 4,200 \
\text { March } & 3,900
\end{array}$ 
Finished goods inventory at the end of December was 900 units.Ending finished goods inventory is equal to 20 percent of the next month's sales.General Corporation expects to sell the boxes for $5 each.April sales are projected at 4,500 boxes.
-
How many boxes should be produced in February?

Accepted Answer

A) 4,140 boxes 
B) 4,200 boxes 
C) 4,260 boxes 
D) 3,900 boxes

Question 16

Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:
The June 30th balance sheet follows:
$$\begin{array} { l r l r } 
\text { Cash } & \$ 25,000 & \text { Accounts payable } & \text { 45,000 } \
\text { Accounts receivable } & 110,000 & \text { Capital stock } & 300,000 \
\text { Inventary } & 54,000 & \text { Retained earrings } & 94,000 \
\text { Building and equipment (net) } & 250,000 & &
\end{array}$$ Actual sales for June and budgeted sales for July,August,and September are given below:
 $$\begin{array} { l l } 
\text { June } & \$ 137,500 \
\text { July } & 360,000 \
\text { August } & 400,000 \
\text { September } & 320,000
\end{array}$$ Sales are 20 percent for cash and 80 percent on credit.All credit sales are collected in the month following the sale.There are no bad debts.
The gross margin percentage is 40 percent of sales.The desired ending inventory is equal to 25 percent of the following month's sales.One quarter of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.
The monthly cash operating expenses are $43,000,and the monthly depreciation expenses are $7,000.
-Refer to the figure.What is the balance of the accounts receivable at the end of July?

Accepted Answer

A) $110,000 
B) $288,000 
C) $360,000 
D) $398,000

Question 17

Which of the following is an operating budget?

Accepted Answer

A) budgeted statement of cash flows 
B) capital expenditures budget 
C) budgeted income statement 
D) cash budget

Question 18

Which of the following is a disadvantage of budgeting?

Accepted Answer

A) It forces managers to plan. 
B) It provides resource information that can be used to improve decision making. 
C) It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance. 
D) It consumes a lot of employee time and energy.

Question 19

When the reaction to a budget is negative,resulting in managerial behaviour that is negative for the organization,what is the resulting behaviour known as?

Accepted Answer

A) dysfunctional behaviour 
B) psychopathic behaviour 
C) congruent behaviour 
D) sociopathic behaviour

Question 20

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 budget for maintenance if 20,000 reflectors were made that required 3,500 machine hours,12 batches,and 5,000 purchase orders?

Accepted Answer

A) $3,500 
B) $14,000 
C) $15,000 
D) $29,000

Exam 8: Budgeting for Planning and Control