ACC650
Module 4 Budgeting and Performance Measures
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1. A formal
budget program will almost always result in:
a. higher
sales.
more cash inflows
than cash outflows.
b. decreased
expenses.
improved profits.
a detailed plan
against which actual results can be compared.
2. Darling
Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:
Actual units produced: 12,000
Actual variable overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead $72,000
Planned level of machine-hour activity 50,000
If Darling estimates four hours to manufacture a completed
unit, the company's standard fixed overhead rate per machine hour would be:
a. $12.00.
$14.40.
$14.60.
$15.00.
some other amount.
Standard fixed overhead rate per machine hour = Budgeted
fixed overhead/Planned level of machine hour activity $720,000/50,000 machine
hours $14.40 per machine hour
3. Wilson
Corporation is budgeting its equipment needs on an ongoing basis, with a new
quarter being added to the budget as the current quarter is completed. This
type of budget is most commonly known as a:
a. capital
budget.
rolling budget.
revised budget.
pro-forma budget.
financial budget.
4. 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?
a. $240,000.
$255,000.
$270,000.
$244,000.
Some other amount.
5. Generally
speaking, budgets are not used to:
a. identify a
company's most profitable products.
evaluate performance.
create a plan of
action.
assist in the control
of profit and operations.
facilitate
communication and coordinate activities.
6. Trois Elles
Corporation recently prepared a manufacturing cost budget for an output of
50,000 units, as follows:
Direct materials $100,000
Direct labor 50,000
Variable overhead 75,000
Fixed overhead 100,000
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:
a. $3,000
favorable.
$23,000 favorable.
$27,000 unfavorable.
$42,000 unfavorable.
none of these
amounts.
7. Which of the
following budgets is based on many other master-budget components?
a. direct
labor budget.
overhead budget.
sales budget.
cash budget.
selling and
administrative expense budget.
8. An
organization's budgets will often be prepared to cover:
a. one month.
one quarter.
one year.
periods longer than
one year.
All of these.
9. 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?
a. 40,600.
41,400.
43,800.
46,200.
Some other amount.
10. A
manufacturing firm would begin preparation of its master budget by constructing
a:
a. sales
budget.
production budget.
cash budget.
capital budget.
set of pro-forma
financial statements.
11. Martin
Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:
Actual units produced: 9,000
Actual variable overhead incurred: $54,400
Actual machine hours worked:
16,000
Standard variable overhead cost per machine hour: $3.50
If Martin estimates two hours to manufacture a completed
unit, the company's variable-overhead efficiency variance is:
a. $1,600
favorable.
$1,600 unfavorable.
$7,000 favorable.
$7,000 unfavorable.
some other amount not
listed above.
Variable-overhead efficiency variance = (AH x SVR) - (SH x
SVR) = SVR(AH - SH) Actual units
produced: 9,000
Actual variable overhead incurred: $54,400
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: $3.50
Variable-overhead efficiency variance = (AH x SVR) - (SH x
SVR)
= SVR(AH - SH)
= 3.5 (16,000
- 18,000)
= 3.5 x -2,000 = -7,000 favorable
This variance is favorable because actual process hours are
less than the standard allowed process hours, given actual output.
SVR = Standard Rate = 3.5
SH = Standard Allowed Process Hours = 2 x 9,000 = 18,000
AH = Actual Process Hours = 16,000
12. Verna'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?
a. $40,000.
$46,000.
$49,000.
$59,000.
Some other amount.
13. The budgeted
income statement, budgeted balance sheet, and budgeted statement of cash flows
comprise:
a. the final
portion of the master budget.
the depiction of an
organization's overall actual financial results.
the first step of the
master budget.
the portion of the
master budget prepared after the sales forecast and before the remainder of the
operational budgets.
the second step of
the master budget.
14. A company's
plan for the acquisition of long-lived assets, such as buildings and equipment,
is commonly called a:
a. pro-forma
budget.
master budget.
financial budget.
profit plan.
capital budget.
15. The
comprehensive set of budgets that serves as a company's overall financial plan
is commonly known as:
a. an
integrated budget.
a pro-forma budget.
a master budget.
a financial budget.
a rolling budget.
16. 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?
a. $69,000.
$138,000.
$177,000
$197,000
Some other amount.
17. 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:
a. $6,300U.
$6,300F.
$8,700U.
$8,700F.
some other amount not
listed above.
18. 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:
Y = $16PH + $640,000 where PH is defined as process hours
What is Del's flexible budget for the preceding cost
function?
a. $1,280,000
$2,080,000
$1,984,000
$1,221,000
$2,112,000
19. A budget
serves as a benchmark against which:
a. actual
results can be compared.
allocated results can
be compared.
actual results become
inconsequential.
allocated results
become inconsequential.
cash balances can be
compared to expense totals.
20. 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 May?
a. $21,000.
$60,000.
$69,000.
$75,000.
Some other amount.
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