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Management Acctg Kls 7-2: Section 1 Tests/Quizzes

Quiz Ch 9-11

This test/quiz is accepting submissions until Tuesday, January 7, 2020 at 3:20 pm

Questions 1-25 of 25 | Page 1 of 1

Question 1 (1 point)

Kenner Company produces two products: SR200 and TX500. Budgeted sales for four months are as follows:

SR200 TX500

May 8,000 20,000

June 13,000 32,000

July 11,000 39,000

August 18,000 46,000

Kenner's ending inventory policy is that SR200 should have 15% of next month's sales in ending inventory and TX500 should have
40% of next month's sales in ending inventory. On May 1, there were 1,200 units of SR200 and 9,000 units of TX500.
TX500 requires 6 units of component A. (SR200 does not use component A.) There were 30,000 units of component A in inventory
on May 1. Kenner wants to have 20% of the following month's production needs in inventory for Component A. What is the
budgeted amount of component A to be purchased in May?

a 142,800
b 164,600
c 41,760
d 66,600
e 154,560

Question 2 (1 point)

A company requires 220 pounds of plastic to meet the production needs of a product. It currently has 25 pounds of plastic inventory.
The desired ending inventory of plastic is 70 pounds. How many pounds of plastic should be budgeted for purchasing during the
coming period?

a 290 pounds
b 245 pounds
c 175 pounds
d 195 pounds
e 265 pounds

Question 3 (1 point)

Wright & Boyle Company budgeted the following production in units for the second quarter of the year:
April 50,000

May 43,000

June 47,000

Each unit requires five pounds of raw material. Wright & Boyle's policy is to have 20% of the following month's production needs
for materials in inventory. This policy was met in March. Raw materials purchases budgeted for May in pounds equal:

a 45,600 pounds.
b 219,000 pounds.
c 202,400 pounds.
d 225,600 pounds.
e 171,600 pounds.

Question 4 (1 point)

​Forward Company had operating income of $75,000, sales of $220,000, and a turnover ratio of 0.55. What is Forward's return on
investment (ROI)? (Note: Round answer to two decimal places.)

a 32.50%
b 64.60%
c 18.75%
d Forward's ROI cannot be determined from this information.
e 50.60%

Question 5 (1 point)

Hexene, Inc. produces a specialized machine part used in forklifts. For last year's operations, the following data were gathered:

Units produced 40,000

Direct labor 32,000 hours @ $10.00

Actual variable overhead $140,000

Hexene employs a standard costing system. During the year, a variable overhead rate of $6.00 was used. The labor standard requires
0.75 hours per unit produced. The variable overhead spending and efficiency variances are:

a $45,000 U and $6,500 U.

b $52,000 F and $12,000 U.
c $9,600 U and $45,000 F.
d $16,000 F and $8,400 F.
e None of these

Question 6 (1 point)

Crawford Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The
standard allows one direct labor hour per unit. Last year, Crawford produced 110,000 units of product, incurred $630,000 of fixed
overhead costs, and recorded 212,000 actual hours of direct labor.

What is Crawford's fixed overhead spending variance for last year?

a $24,000 F
b $30,000 U
c $36,000 U
d $60,000 F

Question 7 (1 point)

Suppose that a company has the following accounts receivable collection pattern:

Paid in the month of sale 25%

Paid in the month following sale 75%

All sales are on credit. If credit sales for January and February are $250,000 and $120,000 respectively, the cash collection for
February is:

a $217,500.
b $100,000.
c $210,000.
d $140,000.
e $130,000.

Question 8 (1 point)

Which of the following is true about ideal standards?

a Ideal standards demand maximum efficiency and no slack is allowed.

b Ideal standards can be achieved under efficient operating conditions.
c Ideal standards provide allowance for normal breakdowns and interruptions.
d All of these.
e None of these.

Question 9 (1 point)

Sleepgood Company produces and sells pillows. It expects to sell 15,000 pillows in the next year and will have 1,500 pillows in
finished goods inventory at the end of the current year. Sleepgood would like to complete operations next year with at least 1,350
completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for $6 each. How many pillows
would be produced in the next year?

a 10,000 pillows
b 11,250 pillows
c 14,850 pillows
d 16,500 pillows

Question 10 (1 point)
The master budget is

a the selective financial plan for the organization as a whole.

b typically for a 1-year period corresponding to the fiscal year of the company.
c broken down into daily and weekly budgets.
d used for misinformation and coordination.
e all of these.

Question 11 (1 point)

Craydye makes all sorts of moldings. Its standard quantity of material allowed is 1 foot of wood per 1 foot of molding at a standard
price of $3.00 per foot. During August, it purchased 200,000 feet of wood at a cost of $2.00 per foot, which produced only 199,000
feet of molding. Calculate the materials price variance and the materials usage variance.

a $400,000 F and $1,000 U

b $600,900 U and $2,500 F
c $200,000 F and $3,000 U
d $700,000 U and $4,000 F

Question 12 (1 point)

Wright Inc. produces leather purses. Wright has developed a static budget for the first quarter based on 25,000 direct labor hours.
During the quarter, the actual activity was 30,000 direct labor hours. Data for the first quarter are summarized as follows:

Static budget Actual costs

(25,000 hours) (30,000 hours)

Direct materials cost $ 85,000 $ 90,000

Direct labor cost 180,000 164,000

Building rental 56,000 60,000

Total $321,000 $314,000

Comparing the static budget to the actual outcomes, we can say:

a direct materials variance is favorable.

b direct labor variance is unfavorable.
c the comparison is useful for assessing managerial efficiency.
d a flexible budget should be used for assessing efficiency.
e All of these are correct.

Question 13 (1 point)

Which of the following is a use of budgets for control?

a Plans can be made for the future.

b If conditions change between the formation of the budget and the current time, budgets can be quickly adapted.
c Budgets set a standard against which results can be compared.
d Communication is improved.
e All of these.
Question 14 (1 point)

Kris Company calculates its predetermined rates using practical volume, which is 325,000 units. The standard cost system allows 3
direct labor hours per unit produced. Overhead is applied using direct labor hours. The total budgeted overhead is $4,260,000, of
which $994,000 is fixed overhead. The actual results for the year are as follows:

Units produced: 318,000

965,000 hours @
Direct labor:
$12.00/hour

Variable overhead: $3,302,000

Fixed overhead: $998,000

Calculate the variable overhead efficiency variance.

a $36,850 U
b $80,000 U
c $36,850 F
d $4,000 U
e None of these.

Question 15 (1 point)

Pallen Company estimated sales of 11,000 units at $40 each, unit cost of goods sold of $22, marketing expense of $65,000 and a
10% commission on each unit sold. Administrative expense is budgeted at $50,000. What is Pallen's budgeted operating income?

a $440,000
b $39,000
c $198,000
d $281,000
e $83,000

Question 16 (1 point)

​Atlas Company provided the following information for last year:

Operating income $ 92,000

Sales 235,000

Beginning operating assets 410,000

Ending operating assets 440,000

Calculate Atlas's margin for last year. (Note: Round answer to two decimal places.)

a 0.39
 b 0.50
c 0.35
d 2.15
e 0.26

Question 17 (1 point)

Which of the following sources of quantitative standards should be used with caution because it can perpetuate inefficiencies?

a Historical experience
b Engineering studies
c Input from operating personnel
d Statistical methods
e None of these

Question 18 (1 point)

​Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following
standards for materials and labor:

Leather (12 strips @ $20) $240

Direct labor (10 hours @ $12) $120

Total prime cost $360

During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or
ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.

Calculate the labor rate variance and the labor efficiency variance, respectively.

a $4,500 U and $3,000 F

b $4,500 F and $3,000 F
c $4,500 F and $3,000 U
d $4,500 U and $3,000 U

Question 19 (1 point)

Depreciation expense on sales equipment appears in a separate line on which of the following budgets?

a Direct labor budget

b Cash budget
c Overhead budget
d Production budget
e Selling and administrative expenses budget

Question 20 (1 point)

Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following
standards for materials and labor:
Leather (12 strips @ $20) $240

Direct labor (10 hours @ $12) $120

Total prime cost $360

During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or
ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.

Compute the total budget variances for materials and labor, respectively.

a $2,800 F and $7,500 U

b $2,800 F and $7,500 F
c $2,800 U and $7,500 F
d $2,800 U and $7,500 U

Question 21 (1 point)

Which of the following is true of a static budget?

a A static budget represents certain goals that a firm wants to achieve.

b It divides costs into those that vary with units of production and those that are fixed with respect to unit-level drivers.
c It ascertains how well costs were controlled during a year.
d It is best used to create a meaningful performance report.
e None of these is correct.

Question 22 (1 point)

In preparing the overhead budget, many companies use

a activity-based costing.
b multiple drivers for a simple budget.
c participative costing.
d a unit-based driver such as direct labor hours.
e none of these.

Question 23 (1 point)

The decision-making approach that allows managers at lower levels to make and implement key decisions pertaining to their areas of
responsibility is

a responsibility accounting.
b controllable accounting.
c decentralization.
d optimal strategic accounting.
e None of these.

Question 24 (1 point)

Which of the following is used to compute the standard quantity of material allowed for the actual output?
 a Fixed Quantity Standard × Standard Output
b Fixed Quantity Standard × Actual Input
c Unit Quantity Standard × Standard Input
d Unit Quantity Standard × Actual Output
e None of these

Question 25 (1 point)

A segment of Mega Inc., manufactures and sells blankets. The various models of blankets are produced in a single factory using
stable technology. They are sold by the sales department, also located in the factory. The segment is most probably accounted for as
a(n)

a cost center.
b revenue center.
c profit center.
d investment center.
e None of these.

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