Quiz 7

Coleman, Inc.
anticipates sales of 50,000 units, 48,000 units, 51,000 units and 50,000 units in
July, August, September and October, respectively. Company policy is to maintain an ending
finished-goods inventory equal to 40% of the following month's sales. On the basis of this
information, how many units would the company plan to produce in September?
50,600.
None of the other answers are correct.
49,200.
46,800.
49,800.
Bird plans to sell 5,000 units each quarter next year. During the first two quarters each unit will
sell for $12; during the last two quarters the sales price will increase $1.50 per unit. What is
Bird's estimated sales revenue for next year?
$240,000.
$270,000.
$255,000.
$244,000.
Swamp Fox has the following sales forecasts for its hip waders next year:
What is Swamp Fox's estimated sales in units for next year?

38,300 pairs.
41,485 pairs.
40,685 pairs.
Delicious Treats (DT) anticipated that 84,000 process hours would be worked during an
upcoming accounting period when, in fact, 92,000 hours were actually worked. One of the
company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What budgeted dollar amount would appear in DT's static budget and flexible budget for the
preceding cost function?
Choice D
Choice B
Choice E
Choice A
Choice C
The Gingham Company's budgeted income statement reflects the following amounts:
Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the
second month following sale. One percent of sales is uncollectible and expensed at the end of
the year.
Gingham pays for all purchases in the month following purchase and takes advantage of a 3%
discount. The following balances are as of January 1:
*Of this balance, $35,000 will be collected in January and the remaining amount will be collected
in February.
The monthly expense figures include $5,000 of depreciation. The expenses are paid in the
month incurred.
Gingham's expected cash balance at the end of February is:

$94,160.
$92,000.
$87,000.
$89,160.
$113,300.
Lucie Corporation's purchasing manager obtained a special price on an aluminum alloy from a
new supplier, resulting in a direct-material price variance of $9,500F. The alloy produced more
waste than normal, as evidenced by a direct-material quantity variance of $2,000U, and was also
difficult to use. This slowed worker efficiency, generating a $2,500U labor efficiency variance. To
help remedy the situation, the production manager used senior line employees, which gave rise
to a $900U labor rate variance. If overall product quality did not suffer, what variance amount is
best used in judging the appropriateness of the purchasing manager's decision to acquire
substandard material?
$4,100F.
$5,000F.
$9,500F.
$7,000F.
$7,500F.
FastTec sells electronics in retail outlets and on the Internet. It uses activity-based budgeting in
the preparation of its selling, general, and administrative expense budget. Which of the following
costs would the company likely classify as a unit-level expense on its budget?
Media advertising.
Salary of the sales manager employed at store no. 23.
Salaries of web-site maintenance personnel.
Administrative salaries.
Retail outlet sales commissions.
A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and
fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total
overhead costs of:
$290,000.
$350,000.
$270,000.
$210,000.
A production supervisor generally has little influence over the:

direct-material quantity variance.
number of units produced.
direct-labor efficiency variance.
All of the others answers are correct.
direct-material price variance.
Rogillo, Inc. had an unfavorable labor efficiency variance and an unfavorable materials quantity
variance. Which department might be held accountable for these variances?
Both Purchasing, because bad materials can harm labor efficiency and Production, because
inefficient workers may use more materials than allowed.
Purchasing, because bad materials can harm labor efficiency.
Production, because inefficient workers may use more materials than allowed.
Shipping.
Marketing.
Dragon makes all sales on account, subject to the following collection pattern: 30% are collected
in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the
second month after sale. If sales for June, July, and August were $120,000, $160,000, and
$220,000, respectively, what were the firm's budgeted collections for August and the company's
budgeted receivables balance on August 31?
Choice C
Choice E
Choice D
Choice B
Choice A
Telfair & Company had 3,000 units in finished-goods inventory on December 31. The following
data are available for the upcoming year:
The number of units the company expects to sell in January is:
6,900.
9,900.
9,400.
11,900.
8,900.
Northcutt's production data for a new deluxe product were taken from the most recent quarterly
production budget:
In addition, Northcutt produces 5,000 units a month of its standard product. It takes two direct
labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe
unit. Northwest's cost per labor hour is $15. Direct labor cost for August would be budgeted at:
$197,107.
$194,750.
$187,125.
$183,250.
The master budget contains the following components, among others: (1) direct-material budget,
(2) budgeted balance sheet, (3) production budget, and (4) cash budget. Which of these
components would be prepared first and which would be prepared last?
Choice D
Choice B
Choice C
Choice E
Choice A
Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the
second month following sale. One percent of sales is uncollectible and expensed at the end of
the year.
Gingham pays for all purchases in the month following purchase and takes advantage of a 3%
discount. The following balances are as of January 1:
*Of this balance, $35,000 will be collected in January and the remaining amount will be collected
in February.
The monthly expense figures include $5,000 of depreciation. The expenses are paid in the
month incurred.
Gingham's budgeted cash receipts in February are:

$113,640.
$91,000.
$113,090.
$114,000.
$95,000.
production budget:
unit. Northwest's cost per labor hour is $15. Direct labor cost for July would be budgeted at:
$183,750.
$189,125.
$194,750.
$187,125.
production budget:
unit. Northwest's cost per labor hour is $15. Direct labor cost for the quarter would be budgeted
at:
$533,125.
$553,950.
$519,075.
$547,750.
Telfair & Company had 3,000 units in finished-goods inventory on December 31. The following data are
available for the upcoming
year

9,400.
9,900.
11,900.
6,900.
8,900.
Mayze Production Company, which uses activity-based budgeting, is in the process of preparing a
manufacturing overhead budget. Which of the following would likely appear on that budget?
Unit-level costs: Depreciation.
Facility and general operations-level costs: Indirect material.
Batch-level costs: Production setup.
Unit-level costs: Maintenance.
Product-level costs: Insurance and property taxes.
Interspace Merchandising anticipated selling 29,000 units of a major product and paying sales commissions of
$6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the
company used a static budget for performance evaluations, Interstate would report a cost variance of:
$6,300U.
$8,700U.
$6,300F.
$8,700F.
Digregory makes all purchases on account, subject to the following payment pattern:
Paid in the month of purchase: 30%
Paid in the first month following purchase: 60%
Paid in the second month following purchase: 10%
If purchases for January, February, and March were $200,000, $180,000, and $230,000, respectively, what
were the firm's budgeted payments in March?
$138,000.
$69,000.
$177,000.
$197,000.
Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is
approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the
following month's production usage. The following data were taken from the most recent quarterly production
budget:
The cost of platinum to be purchased to support August production is:

$200,160.
$391,680.
$198,000.
$195,840.
Young Corporation has a high probability of operating at 40,000 activity hours during the upcoming period,
and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed
the following:
If Young operated at 35,000 hours, its total budgeted cost would be:
$945,000.
$810,000.
$877,500.
$997,500.
$787,500.
A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed
manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of:
$270,000.
$290,000.
$350,000.
$210,000.
Coleman, Inc. anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July, August, and September,
respectively. Company policy is to maintain an ending finished-goods inventory equal to 40% of the following
month's sales. On the basis of this information, how many units would the company plan to produce in
August?
50,600.
49,800.
48,000.
49,200
month's sales. On the basis of this information, how many units would the company plan to produce in July?
52,200.
49,800.
49,200.
46,800.
Northcutt's production data for a new deluxe product were taken from the most recent quarterly production
budget:
In addition, Northcutt produces 5,000 units a month of its standard product. It takes two direct labor hours to
produce each standard unit and 2.25 direct labor hours to produce each deluxe unit. Northwest's cost per
labor hour is $15. Direct labor cost for September would be budgeted at:
$187,125.
$194,750.
$183,075.
$197,075.
Quattro began operations in April of this year. It makes all sales on account, subject to the following collection
pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are
collected in the second month after sale. If sales for April, May, and June were $60,000, $80,000, and $70,000,
respectively, what were the firm's budgeted collections for April?
$21,000.
$18,000.
$60,000.
$65,000.
Gourmet Restaurants has the following flexible-budget formula:
Y = $13PH + $450,000 where PH is defined as process hours.
What is Gourmet's budgeted total cost if its process hours equal 25,000?
$325,000.
$775,000.
Answer cannot be determined from the information provided.
$1,225,000.
$450,000.

40,000 pairs.
41,485 pairs.
38,300 pairs.
40,685 pairs.
Company A uses a heavily participative budgeting approach whereas at Company B, top management
develops all budgets and imposes them on lower-level personnel. Which of the following statements is false?
B's employees may be somewhat disenchanted because although they will be evaluated against a budget, they
really had little say in budget development.
Ethical issues are more likely to arise at Company A, especially when the budget is used as a basis for
performance appraisal.
Budget padding will likely be a greater problem at Company B.
A's employees will likely be more motivated to achieve budgetary goals than the employees of Company B.
Budget preparation time will likely be longer at Company A.
Which of the following statements is (are) true?

Each additional hour of process time is expected to cost Gourmet $13.
Both Gourmet has $450,000 of fixed costs and each additional hour of process time is expected to cost
Gourmet $13.
All of the other answers are correct.
Gourmet has $450,000 of fixed costs.
Y would equal the amount shown as "total cost" in the company's flexible budget.
respectively, what were the firm's budgeted collections for June?
$75,000.
$69,000.
$60,000.
$21,000.
A company's sales forecast would likely consider all of the following factors except:
political and legal events.
advertising and pricing policies.
competition.
top management's attitude toward decentralized operating structures.
general economic and industry trends.
Del's Diner anticipated that 84,000 process hours would be worked during an upcoming accounting period
when, in fact, 90,000 hours were actually worked. One of the company's cost functions is expressed as follows:
What is Del's flexible budget (Y) for the preceding cost function?
$1,221,000
$2,080,000
$1,280,000
$1,984,000
$2,112,000
An examination of Shorter Corporation's inventory accounts revealed the following information:
Raw materials, June 1: 46,000 units

Purchases of raw materials during June: 185,000 units
Shorter's finished product requires four units of raw materials. On the basis of this information, how many
finished products were manufactured during June?
47,500.
45,000.
57,750.
70,500.
Sainte Claire Corporation has a highly automated production facility. Which of the following correctly shows
the two factors that would likely have the most direct influence on the company's manufacturing overhead
budget?
Contribution margin and cash payments.
Management judgment and indirect labor cost.
Production volume and management judgment.
Labor hours and management judgment.
Sales volume and labor hours.
Swansong plans to sell 10,000 units of a particular product during July, and expects sales to increase at the rate
of 10% per month during the remainder of the year. The June 30 and September 30 ending inventories are
anticipated to be 1,100 units and 950 units, respectively. On the basis of this information, how many units
should Swansong purchase for the quarter ended September 30?
31,850.
33,250.
32,150.
32,950.
Bunnie's Bakery anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of
process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was
higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Bunnie $12,
what process-time variance would be disclosed on a performance report that incorporated static budgets and
flexible budgets?
Choice E
Choice D
Choice A
Choice B
Choice C
The master budget contains the following components, among others: (1) direct-material budget, (2) budgeted
balance sheet, (3) production budget, and (4) cash budget. Which of these components would be prepared
first and which would be prepared last?
Choice B
Choice D
Choice C
Choice E
Choice A
A flexible budget is appropriate for a(n):

Choice D
Choice E
Choice C
Choice B
Choice A
rna's makes all sales on account, subject to the following collection pattern: 20% are collected in the month of
sale; 70% are collected in the first month after sale; and 10% are collected in the second month after sale. If
sales for October, November, and December were $70,000, $60,000, and $50,000, respectively, what was the
budgeted receivables balance on December 31?
$59,000.
$49,000.
$46,000.
$40,000.
Brooke-lyn makes all purchases on account, subject to the following payment pattern:
If purchases for April, May, and June were $200,000, $160,000, and $250,000, respectively, what was the
firm's budgeted payables balance on June 30?
$179,000.
$189,000.
$175,000.
$183,000.
Gridiron Merchandising anticipated selling 27,000 units of a major product and paying sales commissions of $6
per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company
used a flexible budget for performance evaluations, Gridiron would report a cost variance of:
$6,400U.
$9,400U.
$6,400F.
$9,400F.
Which of the following would have no effect, either direct or indirect, on an organization's cash budget?
Raw material purchases.
Advertising expenditures.
None of the other answers are correct, since all of these items would have some influence.
Sales revenues.
Outlays for professional labor.
Consider the following statements about budget administration:
I. The budgeting process is a very formal process in all organizations regardless of an organization's size.
II. The budget manual is prepared to communicate budget procedures and deadlines to employees throughout
an organization.
III. Effective internal control procedures require that the budget director be an individual other than the
controller.
Which of the above statements is (are) true?

I and II.
I only.
III only.
I and III.
II only.
Listed below are five variances (and possible causes) that are under review by management of Knox Company.
Which of the following is least likely to cause the variance indicated?
A work-team that is very unhappy with its supervisor; labor efficiency variance.
A malfunctioning piece of manufacturing equipment; labor efficiency variance.
The need to complete goods on a timely basis during a period of high absenteeism; labor rate variance.
The need to ship goods acquired from a distant supplier via FedEx rather than via truck; material price
variance.
The need to close a plant for two days because of blizzard conditions; material quantity variance, part no. 542.
the following:
Young's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:
Y = $180,000 + $18AH.
Y = $945,000.
Y = $4.50AH + $720,000.
Y = $4.50AH + $24AH.
Y = $22.50AH.
Wolverine, Inc. began operations on January 1 of the current year with a $12,000 cash balance. Forty percent
of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 20% of
purchases are paid in the month of purchase, and 80% are paid in the month following purchase. The following
data apply to January and February:
If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500,
determine the change in Wolverine's cash balance during February.
$7,500 increase.
$5,000 increase.
$2,000 increase.
$4,500 increase.
The following selected data pertain to Phineus Corporation:
July's cash disbursements are expected to be:

$674,000.
$404,000.
$734,000.
$464,000.
What is Swamp Fox's estimated sales revenue for next year if each pair sells for an average of $30?
$1,220,550.
$1,149,000.
$1,200,000.
$1,244,550.
FastTec sells electronics in retail outlets and on the Internet. It uses activity-based budgeting in the
preparation of its selling, general, and administrative expense budget. Which of the following costs would the
company likely classify as a unit-level expense on its budget?
Media advertising.
Yorkley Corporation plans to sell 41,000 units of its single product in March. The company has 2,800 units in its
March 1 finished-goods inventory and anticipates having 2,400 completed units in inventory on March 31. On
the basis of this information, how many units does Yorkley plan to produce during March?
43,800.
40,600.
46,200.
41,400.
Northwest's production data for one of its products were taken from the most recent quarterly production
budget:
If it takes two direct labor hours to produce each unit and Northwest's cost per labor hour is $15, direct labor
cost for August would be budgeted at:
$16,500.
$31,200.
$33,000.
$34,800.
The following events took place when Managers A, B, and C were preparing budgets for the upcoming period:
I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local
authorities.
II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor.
III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the
department when preparing the labor budget.
Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example
of building slack in budgets?
II and III.
I and II.
II only.
III only.
I only.
Cohlsen Corporation has a favorable materials quantity variance. Which department would likely be asked to
explain the cause of this variance?
Engineering.
None, because the variance is favorable.
Marketing.
Purchasing.
Production.
Delicious Treats (DT) anticipated that 84,000 process hours would be worked during an upcoming accounting
period when, in fact, 92,000 hours were actually worked. One of the company's cost functions is expressed as
follows:
What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost
function?
Choice B
Choice E
Choice A
Choice C
Choice D
Which of the following would be considered when preparing a company's sales forecast?
Choice D
Choice C
Choice A
Choice B
Choice E
Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month
following sale. One percent of sales is uncollectible and expensed at the end of the year.
Gingham pays for all purchases in the month following purchase and takes advantage of a 3% discount. The
following balances are as of January 1:
*Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February.
The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred.
$113,300.
$92,000.
$89,160.
$94,160.
$87,000.
Trois Elles Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as
follows:
Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct
labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Trois Elles evaluated
performance by the use of a flexible budget, a performance report would reveal a total variance of:
$42,000 unfavorable.
$3,000 favorable.
$23,000 favorable.
Dragon makes all sales on account, subject to the following collection pattern: 30% are collected in the month
of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If
sales for June, July, and August were $120,000, $160,000, and $220,000, respectively, what were the firm's
budgeted collections for August and the company's budgeted receivables balance on August 31?
Choice A
Choice E
Choice B
Choice C
Choice D
To derive the raw material to purchase during an accounting period, an accountant would calculate the raw
material required for production and then:
add the beginning raw-material inventory and subtract the desired ending raw-material inventory.
add the desired ending raw-material inventory and subtract the beginning raw-material inventory.
add the desired ending raw-material inventory and subtract both the beginning raw-material inventory and
the expected units to be sold.
add the beginning raw-material inventory and the desired ending raw-material inventory.
subtract the beginning raw-material inventory and the desired ending raw-material inventory.
If a manager builds slack into a budget, how would that manager handle estimates of revenues and expenses?
Choice B
Choice E
Choice A
Choice C
Choice D
Verna's makes all sales on account, subject to the following collection pattern: 20% are collected in the month
$59,000.
$49,000.
$46,000.
$40,000.
Lucie Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier,
resulting in a direct-material price variance of $9,500F. The alloy produced more waste than normal, as
evidenced by a direct-material quantity variance of $2,000U, and was also difficult to use. This slowed worker
efficiency, generating a $2,500U labor efficiency variance. To help remedy the situation, the production
manager used senior line employees, which gave rise to a $900U labor rate variance. If overall product quality
did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's
decision to acquire substandard material?
$7,000F.
$4,100F.
$5,000F.
$7,500F.
$9,500F.
Zin, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be
worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are
performed; on the other hand, activity could jump to 94,000 hours if one of Zin's major competitors likely goes
bankrupt. A flexible cash budget to determine cash needs would best be based on:
85,000 hours.
78,000 hours, 85,000 hours, and 94,000 hours.
78,000 hours.
94,000 hours.
78,000 hours and 94,000 hours.
respectively, what were the firm's budgeted collections for May?
$60,000.
$21,000.
$75,000.
$69,000.
the company's product costing policy.
planned advertising and promotions.
past sales levels and trends.
the company's intended pricing policy.
market research studies.
budget:
labor hour is $15. Direct labor cost for August would be budgeted at:
$194,750.
$197,107.
$187,125.
$183,250.
budget:
$194,750.
$197,107.
$187,125.
$183,250.
$350,000.
$290,000.
$270,000.
$240,000.
$210,000.
A company that uses activity-based budgeting performs the following:
1—Plans activities for the budget period.

2—Forecasts the demand for products and services as well as the customers to be served.
3—Budgets the resources necessary to carry out activities.
Which of the following denotes the proper order of the preceding activities?
3-2-1.
2-3-1.
1-2-3.
3-1-2.
2-1-3.

Tidewater plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of
raw material. Pertinent data follow.
On the basis of the information presented, how many units of raw material should Tidewater purchase for use
in May production?
282,000.
228,000.
264,000.
246,000.
Nguyen plans to sell 40,000 units of product no. 75 in June, and each of these units requires five square feet of
If the company purchases 201,000 square feet of raw material during the month, the estimated raw-material
inventory on June 30 would be:
11,000 square feet.
25,000 square feet.
23,000 square feet.
13,000 square feet.
Telfair & Company had 3,000 units in finished-goods inventory on December 31. The following data are
available for the upcoming year:

9,400.
9,900.
11,900.
6,900.
8,900.
Mayze Production Company, which uses activity-based budgeting, is in the process of preparing a
manufacturing overhead budget. Which of the following would likely appear on that budget?
Unit-level costs: Depreciation.
Facility and general operations-level costs: Indirect material.
Batch-level costs: Production setup.
Unit-level costs: Maintenance.
Product-level costs: Insurance and property taxes.
Interspace Merchandising anticipated selling 29,000 units of a major product and paying sales commissions of
$6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the
company used a static budget for performance evaluations, Interstate would report a cost variance of:
$6,300U.
$8,700U.
$6,300F.
$8,700F.
Digregory makes all purchases on account, subject to the following payment pattern:
If purchases for January, February, and March were $200,000, $180,000, and $230,000, respectively, what
were the firm's budgeted payments in March?
$138,000.
$69,000.
$177,000.
$197,000.
Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is
approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the
following month's production usage. The following data were taken from the most recent quarterly production
budget:
The cost of platinum to be purchased to support August production is:

$200,160.
$391,680.
$198,000.
$195,840.
the following:
If Young operated at 35,000 hours, its total budgeted cost would be:
$945,000.
$810,000.
$877,500.
$997,500.
$787,500.
$270,000.
$290,000.
$350,000.
$210,000.
month's sales. On the basis of this information, how many units would the company plan to produce in
August?
50,600.
49,800.
48,000.
49,200
month's sales. On the basis of this information, how many units would the company plan to produce in July?
52,200.
49,800.
49,200.
46,800.
budget:
labor hour is $15. Direct labor cost for September would be budgeted at:
$187,125.
$194,750.
$183,075.
$197,075.
respectively, what were the firm's budgeted collections for April?
$21,000.
$18,000.
$60,000.
$65,000.
What is Gourmet's budgeted total cost if its process hours equal 25,000?
$325,000.
$775,000.
Answer cannot be determined from the information provided.
$1,225,000.
$450,000.

40,000 pairs.
41,485 pairs.
38,300 pairs.
40,685 pairs.
Company A uses a heavily participative budgeting approach whereas at Company B, top management
develops all budgets and imposes them on lower-level personnel. Which of the following statements is false?
B's employees may be somewhat disenchanted because although they will be evaluated against a budget, they
really had little say in budget development.
Ethical issues are more likely to arise at Company A, especially when the budget is used as a basis for
performance appraisal.
Budget padding will likely be a greater problem at Company B.
A's employees will likely be more motivated to achieve budgetary goals than the employees of Company B.
Budget preparation time will likely be longer at Company A.
Which of the following statements is (are) true?

Each additional hour of process time is expected to cost Gourmet $13.
Both Gourmet has $450,000 of fixed costs and each additional hour of process time is expected to cost
Gourmet $13.
All of the other answers are correct.
Gourmet has $450,000 of fixed costs.
Y would equal the amount shown as "total cost" in the company's flexible budget.
respectively, what were the firm's budgeted collections for June?
$75,000.
$69,000.
$60,000.
$21,000.
political and legal events.
advertising and pricing policies.
competition.
top management's attitude toward decentralized operating structures.
general economic and industry trends.
Del's Diner anticipated that 84,000 process hours would be worked during an upcoming accounting period
when, in fact, 90,000 hours were actually worked. One of the company's cost functions is expressed as follows:
What is Del's flexible budget (Y) for the preceding cost function?
$1,221,000
$2,080,000
$1,280,000
$1,984,000
$2,112,000
An examination of Shorter Corporation's inventory accounts revealed the following information:

Purchases of raw materials during June: 185,000 units
Shorter's finished product requires four units of raw materials. On the basis of this information, how many
finished products were manufactured during June?
47,500.
45,000.
57,750.
70,500.
Sainte Claire Corporation has a highly automated production facility. Which of the following correctly shows
the two factors that would likely have the most direct influence on the company's manufacturing overhead
budget?
Contribution margin and cash payments.
Management judgment and indirect labor cost.
Production volume and management judgment.
Labor hours and management judgment.
Sales volume and labor hours.
Swansong plans to sell 10,000 units of a particular product during July, and expects sales to increase at the rate
of 10% per month during the remainder of the year. The June 30 and September 30 ending inventories are
anticipated to be 1,100 units and 950 units, respectively. On the basis of this information, how many units
should Swansong purchase for the quarter ended September 30?
31,850.
33,250.
32,150.
32,950.
Bunnie's Bakery anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of
process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was
higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Bunnie $12,
what process-time variance would be disclosed on a performance report that incorporated static budgets and
flexible budgets?
Choice E
Choice D
Choice A
Choice B
Choice C
The master budget contains the following components, among others: (1) direct-material budget, (2) budgeted
balance sheet, (3) production budget, and (4) cash budget. Which of these components would be prepared
first and which would be prepared last?
Choice B
Choice D
Choice C
Choice E
Choice A
A flexible budget is appropriate for a(n):
Choice D
Choice E
Choice C
Choice B
Choice A
rna's makes all sales on account, subject to the following collection pattern: 20% are collected in the month of
sale; 70% are collected in the first month after sale; and 10% are collected in the second month after sale. If
$59,000.
$49,000.
$46,000.
$40,000.
Brooke-lyn makes all purchases on account, subject to the following payment pattern:
If purchases for April, May, and June were $200,000, $160,000, and $250,000, respectively, what was the
firm's budgeted payables balance on June 30?
$179,000.
$189,000.
$175,000.
$183,000.
Gridiron Merchandising anticipated selling 27,000 units of a major product and paying sales commissions of $6
per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company
used a flexible budget for performance evaluations, Gridiron would report a cost variance of:
$6,400U.
$9,400U.
$6,400F.
$9,400F.
Which of the following would have no effect, either direct or indirect, on an organization's cash budget?
Raw material purchases.
Advertising expenditures.
None of the other answers are correct, since all of these items would have some influence.
Sales revenues.
Outlays for professional labor.
Consider the following statements about budget administration:
I. The budgeting process is a very formal process in all organizations regardless of an organization's size.
II. The budget manual is prepared to communicate budget procedures and deadlines to employees throughout
an organization.
III. Effective internal control procedures require that the budget director be an individual other than the
controller.
Which of the above statements is (are) true?

I and II.
I only.
III only.
I and III.
II only.
Listed below are five variances (and possible causes) that are under review by management of Knox Company.
Which of the following is least likely to cause the variance indicated?
A work-team that is very unhappy with its supervisor; labor efficiency variance.
A malfunctioning piece of manufacturing equipment; labor efficiency variance.
The need to complete goods on a timely basis during a period of high absenteeism; labor rate variance.
The need to ship goods acquired from a distant supplier via FedEx rather than via truck; material price
variance.
The need to close a plant for two days because of blizzard conditions; material quantity variance, part no. 542.
the following:
Young's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:
Y = $180,000 + $18AH.
Y = $945,000.
Y = $4.50AH + $720,000.
Y = $4.50AH + $24AH.
Y = $22.50AH.
Wolverine, Inc. began operations on January 1 of the current year with a $12,000 cash balance. Forty percent
of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 20% of
purchases are paid in the month of purchase, and 80% are paid in the month following purchase. The following
data apply to January and February:
If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500,
determine the change in Wolverine's cash balance during February.
$7,500 increase.
$5,000 increase.
$2,000 increase.
$4,500 increase.
The following selected data pertain to Phineus Corporation:
July's cash disbursements are expected to be:

$674,000.
$404,000.
$734,000.
$464,000.
What is Swamp Fox's estimated sales revenue for next year if each pair sells for an average of $30?
$1,220,550.
$1,149,000.
$1,200,000.
$1,244,550.
FastTec sells electronics in retail outlets and on the Internet. It uses activity-based budgeting in the
preparation of its selling, general, and administrative expense budget. Which of the following costs would the
company likely classify as a unit-level expense on its budget?
Media advertising.
Yorkley Corporation plans to sell 41,000 units of its single product in March. The company has 2,800 units in its
March 1 finished-goods inventory and anticipates having 2,400 completed units in inventory on March 31. On
the basis of this information, how many units does Yorkley plan to produce during March?
43,800.
40,600.
46,200.
41,400.
Northwest's production data for one of its products were taken from the most recent quarterly production
budget:
If it takes two direct labor hours to produce each unit and Northwest's cost per labor hour is $15, direct labor
cost for August would be budgeted at:
$16,500.
$31,200.
$33,000.
$34,800.
The following events took place when Managers A, B, and C were preparing budgets for the upcoming period:
I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local
authorities.
II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor.
III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the
department when preparing the labor budget.
Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example
of building slack in budgets?
II and III.
I and II.
II only.
III only.
I only.
Cohlsen Corporation has a favorable materials quantity variance. Which department would likely be asked to
explain the cause of this variance?
Engineering.
None, because the variance is favorable.
Marketing.
Purchasing.
Production.
Delicious Treats (DT) anticipated that 84,000 process hours would be worked during an upcoming accounting
period when, in fact, 92,000 hours were actually worked. One of the company's cost functions is expressed as
follows:
What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost
function?
Choice B
Choice E
Choice A
Choice C
Choice D
Which of the following would be considered when preparing a company's sales forecast?
Choice D
Choice C
Choice A
Choice B
Choice E
Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month
following sale. One percent of sales is uncollectible and expensed at the end of the year.
Gingham pays for all purchases in the month following purchase and takes advantage of a 3% discount. The
following balances are as of January 1:
*Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February.
The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred.
$113,300.
$92,000.
$89,160.
$94,160.
$87,000.
Trois Elles Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as
follows:
Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct
labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Trois Elles evaluated
performance by the use of a flexible budget, a performance report would reveal a total variance of:
$3,000 favorable.
$23,000 favorable.
Dragon makes all sales on account, subject to the following collection pattern: 30% are collected in the month
sales for June, July, and August were $120,000, $160,000, and $220,000, respectively, what were the firm's
budgeted collections for August and the company's budgeted receivables balance on August 31?
Choice A
Choice E
Choice B
Choice C
Choice D
To derive the raw material to purchase during an accounting period, an accountant would calculate the raw
material required for production and then:
add the beginning raw-material inventory and subtract the desired ending raw-material inventory.
add the desired ending raw-material inventory and subtract the beginning raw-material inventory.
add the desired ending raw-material inventory and subtract both the beginning raw-material inventory and
the expected units to be sold.
add the beginning raw-material inventory and the desired ending raw-material inventory.
subtract the beginning raw-material inventory and the desired ending raw-material inventory.
If a manager builds slack into a budget, how would that manager handle estimates of revenues and expenses?
Choice B
Choice E
Choice A
Choice C
Choice D
Verna's makes all sales on account, subject to the following collection pattern: 20% are collected in the month
$59,000.
$49,000.
$46,000.
$40,000.
Lucie Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier,
resulting in a direct-material price variance of $9,500F. The alloy produced more waste than normal, as
evidenced by a direct-material quantity variance of $2,000U, and was also difficult to use. This slowed worker
efficiency, generating a $2,500U labor efficiency variance. To help remedy the situation, the production
manager used senior line employees, which gave rise to a $900U labor rate variance. If overall product quality
did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's
decision to acquire substandard material?
$7,000F.
$4,100F.
$5,000F.
$7,500F.
$9,500F.
Zin, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be
worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are
performed; on the other hand, activity could jump to 94,000 hours if one of Zin's major competitors likely goes
bankrupt. A flexible cash budget to determine cash needs would best be based on:
85,000 hours.
78,000 hours, 85,000 hours, and 94,000 hours.
78,000 hours.
94,000 hours.
78,000 hours and 94,000 hours.
respectively, what were the firm's budgeted collections for May?
$60,000.
$21,000.
$75,000.
$69,000.
the company's product costing policy.
planned advertising and promotions.
past sales levels and trends.
the company's intended pricing policy.
market research studies.
budget:
$194,750.
$197,107.
$187,125.
$183,250.
budget:
$194,750.
$197,107.
$187,125.
$183,250.
$350,000.
$290,000.
$270,000.
$240,000.
$210,000.
A company that uses activity-based budgeting performs the following:
1—Plans activities for the budget period.

2—Forecasts the demand for products and services as well as the customers to be served.
3—Budgets the resources necessary to carry out activities.
Which of the following denotes the proper order of the preceding activities?
3-2-1.
2-3-1.
1-2-3.
3-1-2.
2-1-3.

Tidewater plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of
On the basis of the information presented, how many units of raw material should Tidewater purchase for use
in May production?
282,000.
228,000.
264,000.
246,000.
Nguyen plans to sell 40,000 units of product no. 75 in June, and each of these units requires five square feet of
If the company purchases 201,000 square feet of raw material during the month, the estimated raw-material
inventory on June 30 would be:
11,000 square feet.
25,000 square feet.
23,000 square feet.
13,000 square feet.
Coleman, Inc. anticipates sales of 50,000 units, 48,000 units, 51,000 units and 50,000 units in
July, August, September and October, respectively. Company policy is to maintain an ending
finished-goods inventory equal to 40% of the following month's sales. On the basis of this
information, how many units would the company plan to produce in September?
50,600.
49,200.
46,800.
49,800.
Bird plans to sell 5,000 units each quarter next year. During the first two quarters each unit will
sell for $12; during the last two quarters the sales price will increase $1.50 per unit. What is
Bird's estimated sales revenue for next year?
$240,000.
$270,000.
$255,000.
$244,000.

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Coleman, Inc.

What is Swamp Fox's estimated sales in units for next year?

Y = $16PH + $640,000 where PH is defined as process hours

Gingham's expected cash balance at the end of February is:

A production supervisor generally has little influence over the:

Gingham's budgeted cash receipts in February are:

The number of units the company expects to sell in January is:

The cost of platinum to be purchased to support August production is:

Gourmet Restaurants has the following flexible-budget formula:

Y = $13PH + $450,000 where PH is defined as process hours.

What is Swamp Fox's estimated sales in units for next year?

Gourmet Restaurants has the following flexible-budget formula:

Y = $13PH + $450,000 where PH is defined as process hours.

Which of the following statements is (are) true?

Y = $16PH + $640,000 where PH is defined as process hours

An examination of Shorter Corporation's inventory accounts revealed the following information:

Raw materials, June 1: 46,000 units

A flexible budget is appropriate for a(n):

Consider the following statements about budget administration:

Which of the above statements is (are) true?

The following selected data pertain to Phineus Corporation:

July's cash disbursements are expected to be:

Y = $16PH + $640,000 where PH is defined as process hours

A company that uses activity-based budgeting performs the following:

1—Plans activities for the budget period.

A production supervisor generally has little influence over the:

The number of units the company expects to sell in January is:

The cost of platinum to be purchased to support August production is:

Y = $13PH + $450,000 where PH is defined as process hours.

What is Swamp Fox's estimated sales in units for next year?

Gourmet Restaurants has the following flexible-budget formula:

Y = $13PH + $450,000 where PH is defined as process hours.

Which of the following statements is (are) true?

Y = $16PH + $640,000 where PH is defined as process hours

An examination of Shorter Corporation's inventory accounts revealed the following information:

Raw materials, June 1: 46,000 units

Consider the following statements about budget administration:

Which of the above statements is (are) true?

The following selected data pertain to Phineus Corporation:

July's cash disbursements are expected to be:

Y = $16PH + $640,000 where PH is defined as process hours

A company that uses activity-based budgeting performs the following:

1—Plans activities for the budget period.

A production supervisor generally has little influence over the:

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