Question 1

The usual starting point in budgeting is to make a forecast of production.

Accepted Answer

A) True 
 B)False

Question 2

Community Manufacturing Inc. developed the following standard costs for direct material and direct labor for one of their major products, the 30-gallon heavy-duty plastic container.
   
During May, Community produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an average wage of $14.75 per hour.
-May's direct labor efficiency variance was:

Accepted Answer

A) $750.00 unfavorable. 
B) $262.50 favorable. 
C) $487.50 favorable. 
D) indeterminable using the above information. 
A) $750.00 unfavorable. 
B) $262.50 favorable. 
C) $487.50 favorable. 
D) indeterminable using the above information.

Question 3

Community Manufacturing Inc. developed the following standard costs for direct material and direct labor for one of their major products, the 30-gallon heavy-duty plastic container.
   
During May, Community produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an average wage of $14.75 per hour.
-May's direct labor cost variance was:

Accepted Answer

A) $750.00 unfavorable. 
B) $262.50 favorable. 
C) $487.50 unfavorable. 
D) indeterminable using the above information. 
A) $750.00 unfavorable. 
B) $262.50 favorable. 
C) $487.50 unfavorable. 
D) indeterminable using the above information.

Question 4

The following information for the second quarter of 2011 pertains to Huffington Company:
   
•Cash is collected from customers in the following manner:
   
•40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
•Labor costs are 20% of sales. Other operating costs are $45,000 per month (including $12,000 of depreciation). Both of these are paid in the month incurred.
•The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is required at the end of the month. Money can be borrowed in multiples of $3,000.
•No loans outstanding on June 1.
-How much cash will be disbursed for labor and operating costs in June?

Accepted Answer

A) $63,000 
B) $70,000 
C) $88,400 
D)  $96,400 
A) $63,000 
B) $70,000 
C) $88,400 
D)  $96,400

Question 5

Describe some of the drawbacks of using the operating budget as a control device.

Accepted Answer

When the operating budget is used as a c

Question 6

Grey Manufacturing has prepared the following flexible budget for October and it is in the process of interpreting the variances.F denotes a favorable variance and U denotes an unfavorable variance.
   
Required:
a.Explain what each of the following variances indicates.
1.For Material A,the favorable price variance indicates that…
2.For Material A,the unfavorable quantity variance indicates that…
3.For direct labor,the unfavorable price variance indicates that…
4.For direct labor,the favorable efficiency variance indicates that…
b.Which two variances do you think should be investigated by management? Why?

Accepted Answer

a.
1. For Material A, the favorable pric

Question 7

When the operating budget is used as a control device,managers are more likely to be motivated to budget higher sales than actually anticipated.

Accepted Answer

A) True 
 B)False

Question 8

The direct material quantity variance is computed by multiplying the difference between the actual quantity of material and the standard quantity by the standard price.

Accepted Answer

A) True 
 B)False

Question 9

Traditional budgeting takes a top-down approach.

Accepted Answer

A) True 
 B)False

Question 10

For the next six months, Kurtz Company projects the following information (in units).
   
Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first.
-The number of dealer units that will be produced and sold in September is:

Accepted Answer

A) 900 units. 
B) 1,050 units. 
C) 1,500 units. 
D) 600 units. 
A) 900 units. 
B) 1,050 units. 
C) 1,500 units. 
D) 600 units.

Question 11

If standards are lax,cost variances will tend to be unfavorable.

Accepted Answer

A) True 
 B)False

Question 12

For the next six months, Kurtz Company projects the following information (in units).
   
Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first.
-The production for July is projected to be:

Accepted Answer

A) 300 units. 
B) 900 units. 
C) 1,050 units. 
D) 1,500 units. 
A) 300 units. 
B) 900 units. 
C) 1,050 units. 
D) 1,500 units.

Question 13

The actual information pertains to the month of June. As part of the budgeting process, Petrified Products Company developed the following master budget for June. The manager, Pete, is in the process of preparing the flexible budget and understanding the results.
  
-The flexible budget will report $________ for the flexible (variable)costs.

Accepted Answer

A) $512,000 
B) $600,000 
C) $480,000 
D) $640,000 
A) $512,000 
B) $600,000 
C) $480,000 
D) $640,000

Question 14

Variance analysis explains the difference between planned costs and actual costs by evaluating differences between standard prices and actual prices and budgeted quantities and actual quantities.

Accepted Answer

A) True 
 B)False

Question 15

Operating budgets and financial budgets:

Accepted Answer

A) combined form the master budget. 
B) are prepared before the master budget. 
C) are prepared after the master budget. 
D) have nothing to do with the master budget. 
A) combined form the master budget. 
B) are prepared before the master budget. 
C) are prepared after the master budget. 
D) have nothing to do with the master budget.

Question 16

As part of the budgeting process,Drago Company developed the following master budget for September.Drago is in the process of preparing the flexible budget and understanding the results.
 
Required:
a.Prepare the flexible budget in the area provided above.
b.Determine the flexible budget variance for flexible (variable)costs.
c.Determine the planning variance for flexible (variable)variance costs.
d.Should the manager be congratulated for keeping costs under control? Explain.

Accepted Answer

a.@#IMG-DLM& 
b. Determine the flexible budget var

Question 17

The actual information pertains to the month of June. As part of the budgeting process, Petrified Products Company developed the following master budget for June. The manager, Pete, is in the process of preparing the flexible budget and understanding the results.
  
-The flexible budget will report $________ for the capacity-related (fixed)costs.

Accepted Answer

A) $458,000 
B) $450,000 
C) $360,000 
D) $572,500 
A) $458,000 
B) $450,000 
C) $360,000 
D) $572,500

Question 18

________ specifies when items such as acquisitions for buildings and special-purpose equipment must be made to meet activity level objectives.

Accepted Answer

A) The capital-spending plan 
B) The production plan 
C) The materials purchasing plan 
D) The administrative and discretionary spending plan 
A) The capital-spending plan 
B) The production plan 
C) The materials purchasing plan 
D) The administrative and discretionary spending plan

Question 19

A flexible budget contains:

Accepted Answer

A) cost targets for actual output. 
B) cost targets for planned output. 
C) the difference between planned and actual output. 
D) actual costs for actual output. 
A) cost targets for actual output. 
B) cost targets for planned output. 
C) the difference between planned and actual output. 
D) actual costs for actual output.

The usual starting point in budgeting is to make a forecast of production.

Describe some of the drawbacks of using the operating budget as a control device.

When the operating budget is used as a control device,managers are more likely to be motivated to budget higher sales than actually anticipated.

The direct material quantity variance is computed by multiplying the difference between the actual quantity of material and the standard quantity by the standard price.

Traditional budgeting takes a top-down approach.

For the next six months, Kurtz Company projects the following information (in units). Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first. -The number of dealer units that will be produced and sold in September is:

If standards are lax,cost variances will tend to be unfavorable.

For the next six months, Kurtz Company projects the following information (in units). Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first. -The production for July is projected to be:

Variance analysis explains the difference between planned costs and actual costs by evaluating differences between standard prices and actual prices and budgeted quantities and actual quantities.

Operating budgets and financial budgets:

________ specifies when items such as acquisitions for buildings and special-purpose equipment must be made to meet activity level objectives.

A flexible budget contains:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Financial Control

Filters

Exam 10: Using Budgets for Planning and Coordination

The usual starting point in budgeting is to make a forecast of production.

Describe some of the drawbacks of using the operating budget as a control device.

When the operating budget is used as a control device,managers are more likely to be motivated to budget higher sales than actually anticipated.

The direct material quantity variance is computed by multiplying the difference between the actual quantity of material and the standard quantity by the standard price.

Traditional budgeting takes a top-down approach.

For the next six months, Kurtz Company projects the following information (in units). Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first. -The number of dealer units that will be produced and sold in September is:

If standards are lax,cost variances will tend to be unfavorable.

For the next six months, Kurtz Company projects the following information (in units). Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first. -The production for July is projected to be:

Variance analysis explains the difference between planned costs and actual costs by evaluating differences between standard prices and actual prices and budgeted quantities and actual quantities.

Operating budgets and financial budgets:

________ specifies when items such as acquisitions for buildings and special-purpose equipment must be made to meet activity level objectives.

A flexible budget contains:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Financial Control

Filters