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BT12203 BUSINESS ACCOUNTING

TUTORIAL REVISION QUESTIONS

Question 1 and 2 are based on the following information:


The LaGrange Company had the following budgeted sales for the first half of the current year:

The company is in the process of preparing a cash budget and must determine the expected cash
collections by month. To this end, the following information has been assembled:

Collections on sales: 60% in month of sale


30% in month following sale
10% in second month following sale

The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000
represents uncollected December sales and $20,000 represents uncollected November sales.

1. The total cash collected during January by LaGrange Company would be:
A. $410,000
B. $254,000
C. $344,000
D. $331,500

2. What is the budgeted accounts receivable balance on June 1 of the current year?
A. $56,000
B. $64,000
C. $76,000
D. $132,000

Question 3 and 4 are based on the following information:


Richards Company has the following budgeted sales for the first half of next year:
The company is in the process of preparing a cash budget and must determine the expected cash
collections by month. To this end, the following information has been assembled:

Collections on credit sales:


60% in month of sale
30% in month following sale
10% in second month following sale

3. Assume that the accounts receivable balance on January 1 is $70,000. Of this amount, $60,000
represents uncollected December sales and $10,000 represents uncollected November sales.
Given these data, the total cash collected during January would be:
A. $270,000
B. $420,000
C. $345,000
D. $360,000

4. What is the budgeted accounts receivable balance on May 31?


A. $81,000
B. $68,000
C. $60,000
D. $141,000

Question 5 to 7 are based on the following information:


Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal
year ended on November 30 appears below:

Additional information regarding Super Drive's operations appear below:


 Sales are budgeted at $520,000 for December and $500,000 for January.
 Collections are expected to be 60% in the month of sale and 40% in the month following sale.
There are no bad debts.
 80% of the disk drive components are purchased in the month prior to the month of the sale,
and 20% are purchased in the month of the sale. Purchased components comprise 40% of the
cost of goods sold.
 Payment for components purchased is made in the month following the purchase.
 Assume that the cost of goods sold is 80% of sales.

5. The budgeted cash collections for the upcoming December should be:
A. $208,000
B. $520,000
C. $402,000
D. $462,000

6. The balance in accounts payable on the budgeted balance sheet for December 31 should be:
A. $161,280
B. $326,400
C. $165,120
D. $403,200

7. The budgeted gross margin for the month ending December 31 would be:
A. $416,000
B. $104,000
C. $134,000
D. $536,000

Question 8 to 11 are based on the following information:


Vandall Corporation manufactures and sells a single product. The company uses units as the
measure of activity in its budgets and performance reports. During April, the company budgeted
for 7,300 units, but its actual level of activity was 7,340 units. The company has provided the
following data concerning the formulas used in its budgeting and its actual results for April:
8. The revenue variance for April would be closest to:
A. $4,274 F
B. $5,690 F
C. $5,690 U
D. $4,274 U

9. The spending variance for direct materials in April would be closest to:
A. $210 U
B. $210 F
C. $426 U
D. $426 F
10. The spending variance for manufacturing overhead in April would be closest to:
A. $1,600 U
B. $1,648 F
C. $1,600 F
D. $1,648 U

11. The overall revenue and spending variance (i.e., the variance for net operating income in the
revenue and spending variance column on the flexible budget performance report) for April
would be closest to:
A. $6,144 F
B. $6,740 U
C. $6,740 F
D. $6,144 U

Question 12 to 16 are based on the following information:


The Apoundright Company uses standard costing and has established the following standards for
its single product:

Direct materials: 2 gallons at $3 per gallon


Direct labor: 0.5 hours at $8 per hour
Variable overhead: 0.5 hours at $2 per hour

During November, the company made 4,000 units and incurred the following costs:

Direct materials purchased: 8,100 gallons at $3.10 per gallon


Direct materials used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual variable overhead: $4,175

The company applies variable overhead to products on the basis of standard direct labor-hours.

12. The materials price variance for November was:


A. $2,310 U
B. $2,310 F
C. $810 U
D. $810 F
13. The materials quantity variance for November was:
A. $1,200 U
B. $1,200 F
C. $300 U
D. $1,500 F
14. The labor rate variance for November was:
A. $1,050 U
B. $550 U
C. $2,150 U
D. $2,150 F

15. The labor efficiency variance for November was:


A. $1,050 U
B. $550 U
C. $1,600 F
D. $1,600 U

16. The total variable overhead variance (including both the rate and efficiency variances) for
November was:
A. $175 U
B. $225 F
C. $225 U
D. $400 U