Question 1

Efficient Corporation uses a standard cost system. The following information was provided for the period that just ended: $\begin{array}{ll}
\$ 11.75 & \text { Actual price per gallon } \
5,000 & \text { Actual gallons of material used } \
\$ 17.00 & \text { Actual hourly labor rate } \
24,300 & \text { Actual hours of prochuction } \
\$ 12.00 & \text { Standard price per gallon } \
1 / 2 & \text { Standard gallons per completed urit } \
\$ 12.00 & \text { Standard hourly labor rate } \
3 \mathrm{hrs} . & \text { Standard time per completed urit } \
9,000 & \text { Units completed churingthe period }
\end{array}$ Refer to the information provided for Efficient Corporation. The direct labor time variance is:

Accepted Answer

A)  $31,725 favorable. 
B)  $32,400 favorable. 
C)  $89,100 unfavorable. 
D)  $121,500 unfavorable.

Question 2

Flexible budgeting builds the effect of changes in level of activity into the budget system.

Accepted Answer

A) True 
 B)False

Question 3

If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for 2012 is 198,000 units.

Accepted Answer

A) True 
 B)False

Question 4

The following data relate to direct labor costs for the current period of Executive Inc.: $\begin{array}{lrr}
  \text {6,000 hours at $ \$12.00 $  } & \text { Standard costs } \
 \text {7,500 hours at $ \$ 11.60 $ } & \text { Actual costs } \
\end{array}$

Refer to the information provided for Executive Inc. What is the direct labor rate variance?

Accepted Answer

A)  $3,000 unfavorable 
B)  $3,000 favorable 
C)  $2,400 unfavorable 
D)  $2,400 favorable

Question 5

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $4,800 favorable.

Accepted Answer

A) True 
 B)False

Question 6

Favorable volume variances may be harmful when:

Accepted Answer

A)  machine repairs cause work stoppages. 
B)  supervisors fail to maintain an even flow of work. 
C)  production in excess of normal capacity cannot be sold. 
D)  there are insufficient sales orders to keep the factory operating at normal capacity.

Question 7

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

Accepted Answer

A)  unfavorable quantity variance. 
B)  unfavorable controllable variance. 
C)  favorable volume variance. 
D)  favorable labor rate variance.

Question 8

The following data relate to direct materials costs of Texas Inc. for November: $\begin{array}{lrr}
  \text {4,500 pounds at $ \$ 6.00 $  } & \text { Actual costs } \
 \text { 4,600 pounds at $ \$ 5.50 $ } & \text {  Standard costs} \
\end{array}$

Refer to the information provided for Texas Inc. What is the direct materials quantity variance?

Accepted Answer

A)  $550 unfavorable 
B)  $550 favorable 
C)  $600 favorable 
D)  $600 unfavorable

Question 9

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 favorable.

Accepted Answer

A) True 
 B)False

Question 10

Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.

Accepted Answer

A) True 
 B)False

Question 11

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended: $\begin{array}{ll}
\$ 2.50 & \text { Actual price per kilogram } \
31,000 & \text { Actual lilograms of material used } \
\$ 18.10 & \text { Actual hourly labor rate } \
4.900 \text { lahor hrs } & \text { Actual hmurs of morhuction }\
\$ 2.80 & \text { Standard price per kilogram } \
6 \text { kilograms } & \text { Standard kilograms per completed urit } \
\$ 18.00 & \text { Standard hourly labor rate } \
1 \text { hr. } & \text { Standard time per completed urit } \
\$ 34,900 & \text { Actual total factory overhead }\
\$ 18,000 & \text { Actual fixed factory overhead } \
\$ 1.20 \text { per labor hour } & \text { Standard fixed factory overhead rate } \
\$ 3.80 \text { per labor hour } & \text { Standard variable factory overhead rat } \
15,000 \text { hours } & \text { Maximum plant capacity } \
5,000 & \text { Units completed churing the period }
\end{array}$

Refer to the information provided for Frogue Company. The total factory overhead cost variance is:

Accepted Answer

A)  $3,900 favorable. 
B)  $10,400 favorable. 
C)  $10,400 unfavorable. 
D)  $9,900 unfavorable.

Question 12

Estimated cash payments are planned reductions in cash from all of the following except:

Accepted Answer

A)  manufacturing and selling and administrative expenses. 
B)  capital expenditures. 
C)  notes receivables and accounts receivable collections. 
D)  payments for interest or dividends.

Question 13

A disadvantage of static budgets is that they:

Accepted Answer

A)  start with a clean slate. 
B)  cannot be used by service companies. 
C)  do not show possible changes in underlying activity levels. 
D)  show the expected results of a responsibility center for several levels of activity.

Question 14

The sales budget is the starting point for preparation of the direct labor cost budget.

Accepted Answer

A) True 
 B)False

Question 15

The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as:

Accepted Answer

A)  flexible budgeting. 
B)  continuous budgeting. 
C)  zero-based budgeting. 
D)  master budgeting.

Question 16

When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.

Accepted Answer

A) True 
 B)False

Question 17

Answer Corporation uses standard cost system. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows: $\begin{array}{ll}
\text { StandardCosts } \ 
2,500 \text { kilograms@\$8 }& \text { Direct labor }  \
7,500 \text { hours @ } \$ 12 & \text { Direct material } \
\
\text { Actual Costs } & \
2,600 \text { kilograms } @ \$ 8.75 & \text { Direct material } \
7,400 \text { hours } \$ 11.40 & \text { Direct labor } \
\text { Factory overhead(100\% capacity- } 10,000 \text { hrs.): } &
\end{array}$
 Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
Refer to the information provided for Answer Corporation. The amount of the direct labor time variance is:

Accepted Answer

A)  $1,200 favorable. 
B)  $1,140 unfavorable. 
C)  $1,200 unfavorable. 
D)  $1,140 favorable.

Question 18

Trapp Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:
 $\begin{array}{ll}
\$ 100,000 & \text { August } \
185,000 & \text { September } \
225,000 & \text { October }
\end{array}$
 The company expects to sell 40% of its merchandise for cash. Of the sales on account, one third are expected to be collected in the month of the sale and the remainder in the following month.
Prepare a schedule indicating cash collections of accounts receivable for August, September, and October.

Accepted Answer

The answer of Trapp Co. was organized on August 1...

Question 19

Cape Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below. $\begin{array}{lll}
\$ 0.60 \text { per pound } & .50 \mathrm{lb} . \text { per unit } & \text { Material A } \
\$ 1.70 \text { per pound } & 1.00 \mathrm{lb} \text {. per unit } & \text { Material } \mathrm{B} \
\$ 1.00 \text { per pound } & 1.20 \mathrm{lb} . \text { per unit } & \text { Material C }
\end{array}$ Refer to the information provided for Cape Corporation. The amount of direct material A purchased during the year is:

Accepted Answer

A)  $216,000. 
B)  $186,600. 
C)  $192,000. 
D)  $245,400.

Question 20

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the selling and administrative expenses budget.

Accepted Answer

A) True 
 B)False

Exam 13: Budgeting and Standard Cost Systems

Flexible budgeting builds the effect of changes in level of activity into the budget system.

If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for 2012 is 198,000 units.

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $4,800 favorable.

Favorable volume variances may be harmful when:

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 favorable.

Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.

Estimated cash payments are planned reductions in cash from all of the following except:

A disadvantage of static budgets is that they:

The sales budget is the starting point for preparation of the direct labor cost budget.

The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as:

When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the selling and administrative expenses budget.