Question 1

The budget process involves doing all the following EXCEPT
A)establishing specific goals.
B)executing plans to achieve the goals.
C)periodically comparing actual results with the goals.
D)dismissing all managers who fail to achieve operational goals specified in the budget.

Accepted Answer

The budget process involves establishing specific goals, executing plans to achieve these goals, and periodically comparing actual results with the goals to adjust plans if necessary. However, dismissing all managers who fail to achieve operational goals specified in the budget is not typically part of the budget process. Instead, managers may be held accountable for their performance and given opportunities to improve before facing termination.

Question 2

Favorable volume variances are never harmful since achieving them encourages managers to run the factory above normal capacity.

Accepted Answer

Favorable volume variances may be harmful if they are achieved by overloading the factory and causing inefficiencies, increased costs, and diminished product quality. Managers should strive for optimal capacity utilization rather than simply maximizing volume.

Question 3

Below is budgeted production and sales information for Cooper Cans,Inc.for the month of March:
  The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15.
-Budgeted production for aluminum cans during the month is
A)476,000 units.
B)484,000 units.
C)480,000 units.
D)504,000 units.

Accepted Answer

The answer of Below is budgeted production and sales information...

Question 4

The first budget customarily prepared as part of an entity's master budget is the
A)production budget.
B)cash budget.
C)sales budget.
D)direct materials purchases.

Accepted Answer

The first budget prepared as part of an entity's master budget is typically the sales budget. This budget sets out the expected sales for the budget period and serves as the basis for preparing the other budgets, such as the production budget, which depends on the level of expected sales.

Question 5

The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost budget.

Accepted Answer

A factory overhead cost budget is not the most effective means of presenting standard factory overhead cost variance data. A factory overhead cost variance report is a more effective means of presenting this data because it shows the actual variances from the standard costs, as well as the reasons for the variances.

Question 6

Principal components of a master budget include which of the following?
A)Production budget
B)Sales budget
C)Capital expenditures budget
D)All of these

Accepted Answer

The principal components of a master budget include the production budget, sales budget, and capital expenditures budget, among others. Therefore, all of these choices are correct. The master budget is a comprehensive financial plan that outlines an organization's goals, objectives, and strategies for achieving those goals, and it depends on these various budgets to ensure that all parts of the organization are working together effectively.

Question 7

The production budgets are used to prepare which of the following budgets?
A)Selling and administrative expenses
B)Direct materials purchases,direct labor cost,factory overhead cost
C)Sales
D)Capital expenditures

Accepted Answer

The production budget is used to determine the quantity and cost of direct materials purchases, direct labor costs, and factory overhead costs that will be needed to support the production level outlined in the budget.

Question 8

A disadvantage of static budgets is that they
A)start with a clean slate.
B)cannot be used by service companies.
C)do not show possible changes in underlying activity levels.
D)show the expected results of a responsibility center for several levels of activity.

Accepted Answer

Static budgets are based on a single level of activity and do not show the possible changes in underlying activity levels. This can make it difficult to adjust the budget if actual activity levels differ from the original budget assumptions.

Question 9

If the standard to produce a given amount of product is 16,000 hours at a factory overhead rate of $5 ($3 fixed,$2 variable),actual variable factory overhead was $26,400,actual fixed factory overhead was $45,000,and 100% of productive capacity is 15,000 hours,the volume variance was $3,000 favorable.

Accepted Answer

Volume variance = (actual hours produced - budgeted hours) * budgeted overhead rate
Budgeted overhead rate = $5
Budgeted hours for 100% capacity = 16,000 hours
Budgeted overhead for 100% capacity = $80,000 ($3 * 16,000 + $2*16,000)
Actual variable factory overhead = $26,400
Actual fixed factory overhead = $45,000

Actual hours produced = (actual variable factory overhead / variable overhead rate) + (actual fixed factory overhead / fixed overhead rate)
Actual hours produced = ($26,400 / $2) + ($45,000 / $3) = 13,200 + 15,000 = 28,200

Volume variance = (28,200 - 16,000) * $5 = $62,000 (unfavorable)
However, the question states that the volume variance was actually $3,000 favorable. This means that there was an error in the question or that the calculations are incorrect.

Question 10

For February,sales revenue is $250,000;sales commissions are 6% of sales;the sales manager's salary is $50,000;advertising expenses are $15,000;shipping expenses total 1% of sales;and miscellaneous selling expenses are $1,000 plus 1/2 of 1% of sales.Total selling expenses for the month of February are
A)$65,000.
B)$69,750.
C)$82,250.
D)$84,750.

Accepted Answer

- Sales Commissions = 6% of $250,000 = $15,000
- Advertising Expenses = $15,000
- Shipping Expenses = 1% of $250,000 = $2,500
- Miscellaneous Selling Expenses = $1,000 plus 1/2 of 1% of $250,000 = $2,250

Total Selling Expenses = $15,000 + $50,000 + $15,000 + $2,500 + $2,250 = $84,750.

Therefore, the best choice is D.

Question 11

Below is budgeted production and sales information for Cooper Cans,Inc.for the month of March:
  The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15.
-Budgeted sales for the month are
A)$63,000.
B)$62,750.
C)$63,250.
D)$66,450.

Accepted Answer

The correct budgeted sales for the month are $63,000.

Question 12

An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work.

Accepted Answer

An unfavorable volume variance means that the actual volume of work performed is less than what was expected. If supervisors are not maintaining an even flow of work, there is a higher chance of experiencing fluctuations in the amount of work being performed, which could lead to an unfavorable volume variance.

Question 13

A series of budgets for varying rates of activity is termed a(n)
A)flexible budget.
B)variable budget.
C)master budget.
D)activity budget.

Accepted Answer

A flexible budget is designed to change in accordance with fluctuations in activity levels, making it the best choice for a series of budgets for varying rates of activity. The other options are not specific to changes in activity levels.

Question 14

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed
A)flexible budgeting.
B)master budgeting.
C)zero-based budgeting.
D)continuous budgeting.

Accepted Answer

Continuous budgeting is a variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times, enabling the budget to be updated and revised as necessary based on actual results and changing conditions. This allows for flexibility and ensures that the budget is always current and relevant to the organization's goals and objectives. A master budget refers to a comprehensive budget that summarizes all the company's plans and goals, while zero-based budgeting requires justification for every expense at each budget cycle. Flexible budgeting is a budget that adjusts for changes in the levels of activity.

Question 15

Since the controllable variance measures the efficiency of using variable overhead resources,if budgeted variable overhead exceeds actual results,the variance is favorable.

Accepted Answer

A favorable variance occurs when the actual spending is less than what was budgeted, indicating efficient use of resources.

Question 16

The process of developing budget estimates by requiring all levels of management to estimate sales,production,and other operating data as though operations were being initiated for the first time is referred to as
A)flexible budgeting.
B)continuous budgeting.
C)zero-based budgeting.
D)master budgeting.

Accepted Answer

The process described is zero-based budgeting, which involves starting from scratch each budget period rather than simply adjusting the previous period's budget. It requires all levels of management to justify and prioritize their expenses based on their contribution to the company's objectives.

Question 17

If the standard to produce a given amount of product is 12,000 hours at a factory overhead rate of $5 ($3 fixed,$2 variable),actual variable factory overhead was $26,400,actual fixed factory overhead was $45,000,and 100% of productive capacity is 15,000 hours,the volume variance was $9,000 favorable.

Accepted Answer

The given information does not provide enough information to calculate the volume variance. The volume variance is based on the difference between the standard amount of hours and the actual amount of hours used. The given information only provides the actual variable and fixed factory overheads and the productive capacity, but not the actual amount of hours used. Therefore, the answer is False.

Question 18

When department managers plan lower goals than possible in order to build in a cushion for unexpected events,the result is
A)budgetary slack.
B)zero-based budgeting.
C)goal conflict.
D)flexible budgeting.

Accepted Answer

When department managers plan lower goals than possible in order to build in a cushion for unexpected events, it is known as budgetary slack. This allows them to have room for error and still appear successful in meeting their goals.

Question 19

Christiansen and Sons' static budget for 10,000 units of production includes $50,000 for direct materials,$44,000 for direct labor,utilities of $5,000,and supervisor salaries of $15,000.A flexible budget for 12,000 units of production would show
A)the same cost structure in total.
B)direct materials of $60,000,direct labor of $52,800,utilities of $6,000,and supervisor salaries of $15,000.
C)total variable costs of $136,800.
D)direct materials of $60,000,direct labor of $52,800,utilities of $6,000,and supervisor salaries of $18,000.

Accepted Answer

The answer of Christiansen and Sons' static budget for 10,000...

Question 20

The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report.

Accepted Answer

A factory overhead cost variance report is a standard tool used to present factory overhead cost variance data. It provides a summary of the actual and budgeted costs, the variances, and the reasons for the variances, making it an effective means of communication and analysis.

Quiz 13: Budgeting and Standard Cost Systems

The budget process involves doing all the following EXCEPT

Favorable volume variances are never harmful since achieving them encourages managers to run the factory above normal capacity.

Below is budgeted production and sales information for Cooper Cans,Inc.for the month of March: The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15. -Budgeted production for aluminum cans during the month is

The first budget customarily prepared as part of an entity's master budget is the

The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost budget.

Principal components of a master budget include which of the following?

The production budgets are used to prepare which of the following budgets?

A disadvantage of static budgets is that they

Below is budgeted production and sales information for Cooper Cans,Inc.for the month of March: The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15. -Budgeted sales for the month are

An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work.

A series of budgets for varying rates of activity is termed a(n)

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed

Since the controllable variance measures the efficiency of using variable overhead resources,if budgeted variable overhead exceeds actual results,the variance is favorable.

The process of developing budget estimates by requiring all levels of management to estimate sales,production,and other operating data as though operations were being initiated for the first time is referred to as

When department managers plan lower goals than possible in order to build in a cushion for unexpected events,the result is

Christiansen and Sons' static budget for 10,000 units of production includes $50,000 for direct materials,$44,000 for direct labor,utilities of $5,000,and supervisor salaries of $15,000.A flexible budget for 12,000 units of production would show

The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report.