Question 1

Stockport Manufacturing is preparing its purchases budget for the 2nd quarter of the year. The following information is given in units.
Beginning inventory = 350
Ending inventory = 425
Sales forecast for second quarter = 950
How many units should be purchased in the second quarter?
A) 600
B) 950
C) 1025
D) 1375

Accepted Answer

To calculate the units to be purchased, we need to first calculate the total units needed:
Total units needed = Sales forecast + Ending inventory - Beginning inventory
Total units needed = 950 + 425 - 350 = 1025
Therefore, Choice C (1025 units) is the correct answer.

Question 2

The sales budget for Joy Time Toys for the first three months of the year is expected to be $50 000, $40 000 and $60 000 with 30% of each month's sales being on credit. Collections of accounts receivable are scheduled at 40% during the month of sale, 55% during the month following the sale with 5% uncollectable. The total budgeted cash receipts from sales for the second month will be:
A) $32 800.
B) $38 000.
C) $40 000.
D) $41 050.

Accepted Answer

Sales in the second month are budgeted to be $40 000 with 30% or $12 000 being on credit. 
Collections during the month of sale: 40% of $12 000 = $4 800 
Collections during the month following the sale: 55% of $12 000 = $6 600 
Uncollectible accounts: 5% of $12 000 = $600 
Total cash receipts from sales for the second month: $4 800 + $6 600 - $600 = $10 800 
Adding cash collections from credit sales from previous month: $40 000 - 30% x $40 000 = $28 000 
Total budgeted cash receipts from sales for second month: $10 800 + $28 000 = $38 800 
Rounding to nearest $50: $38 800 ≈ $38 000.

Question 3

A) 4800.
B) 6480.
C) 7920.
D) 10 400.

Accepted Answer

The answer of 
A) 4800.
B) 6480.
C) 7920.
D) 10 400.
...

Question 4

The technique in which budget variables are altered and the effect of the changes on the income statement and the balance sheet are recorded is known as:
A) what if analysis.
B) variable analysis.
C) spreadsheet analysis.
D) profit analysis.

Accepted Answer

The technique described is commonly known as "what-if analysis," in which various scenarios are tested by changing budget variables to see how they would impact the financial statements. Choice B (variable analysis) and D (profit analysis) could also potentially involve altering budget variables, but they are not specific enough to describe this particular technique. Choice C (spreadsheet analysis) is a general term that could refer to many different types of analyses performed using spreadsheets.

Question 5

The budget that should be prepared before the others listed is:
A) manufacturing overhead budget.
B) cost of goods manufactured budget.
C) cash budget.
D) production budget.

Accepted Answer

The production budget is the first step in the budgeting process because it determines the number of units that need to be produced to meet sales demands and inventory requirements, which then informs the other budgets such as the manufacturing overhead budget, cost of goods manufactured budget, and cash budget.

Question 6

Which of these is not part of the control phase of budgeting?
A) Comparing actual performance with budget estimates.
B) Identifying any significant variances.
C) Deciding what action should be taken.
D) Setting goals.

Accepted Answer

Setting goals is part of the planning phase of budgeting, not the control phase. The control phase focuses on comparing actual performance with budget estimates, identifying variances, and deciding what action should be taken.

Question 7

Which of these account balances is not reported on the balance sheet?
A) Cost of sales
B) Materials inventory
C) Work in progress inventory
D) Finished goods inventory

Accepted Answer

Cost of sales is an expense account and is reported on the income statement, not on the balance sheet. Materials inventory, work in progress inventory, and finished goods inventory are all assets that are reported on the balance sheet.

Question 8

An example of a fixed factory overhead cost is:
A) indirect materials.
B) council rates and taxes.
C) direct labour.
D) light and power.

Accepted Answer

Council rates and taxes are a fixed cost as they do not vary with changes in the level of production or sales. Indirect materials (option A), direct labor (option C), and light and power (option D) are variable costs as they will change with changes in production.

Question 9

DigiSnaps plans to produce 65 000 units per month during 2014. Sales are projected at 55 000 for January and will increase 5% per month thereafter. There are 2000 units on hand at 1 January 2014. How many units will be on hand at 28 February 2014?
A) 15 750
B) 17 250
C) 19 250
D) 22 000

Accepted Answer

In January, sales are 55,000 units. In February, sales increase by 5%, so February sales are 55,000 * 1.05 = 57,750 units. Production is 65,000 units per month. Starting inventory is 2,000 units. Inventory at the end of February = Starting inventory + January production - January sales + February production - February sales = 2,000 + 65,000 - 55,000 + 65,000 - 57,750 = 19,250 units.

Question 10

Budgeted direct materials purchases in units equals:
A) budgeted direct materials usage plus beginning direct materials less desired ending direct materials.
B) budgeted direct materials usage less beginning direct materials plus desired ending direct materials.
C) budgeted direct materials in stock plus beginning direct materials inventory less desired ending direct materials.
D) budgeted direct materials in stock less beginning direct materials inventory plus desired ending direct materials.

Accepted Answer

Budgeted direct materials purchases in units are calculated by taking the budgeted direct materials usage, subtracting the beginning direct materials inventory, and adding the desired ending direct materials inventory.

Question 11

A) $150
B) $1800
C) $1440
D) $2400

Accepted Answer

The code in the image suggests that the product is TB3115 and the price is $120 per dozen. Therefore, the price of each TB3115 product is $10. Multiplying $10 by 12 gives us $120, which is the wholesale price for a dozen TB3115 products. To find the total cost of 12 dozen TB3115 products, we multiply $120 by 12, giving us a total of $1440.

Question 12

It is estimated that direct materials, direct labour and factory overhead for the period will total $500 000. If work in process at the start is $35 000 and estimated work in process at the end is $40 000, the cost of goods manufactured is:
A) $495 000.
B) $250 000.
C) $350 000.
D) $505 000.

Accepted Answer

The cost of goods manufactured is calculated by adding the total manufacturing costs to the beginning work in process inventory and then subtracting the ending work in process inventory. So, $500,000 (total manufacturing costs) + $35,000 (beginning work in process) - $40,000 (ending work in process) = $495,000.

Question 13

Which of the following is a typical example of a variable cost?
A) Sales commission
B) Depreciation
C) Rent
D) Cleaning

Accepted Answer

Sales commission is a typical example of a variable cost because it varies with the level of sales. The higher the sales, the higher the commission paid to sales representatives. Depreciation, rent, and cleaning are fixed costs and do not vary with sales.

Question 14

Information for Fine Line Fishing Product's cash budget is as follows.

Each unit sells for $12 and 80% of sales are on credit. Credit sales are collected as follows: 25% in the quarter of the sale and the balance in the following quarter. How many dollars of 3rd quarter sales will be collected in cash in the 4th quarter?
A) $225
B) $2160
C) $180
D) $2700

Accepted Answer

The answer of Information for Fine Line Fishing Product's cash...

Question 15

Predetermined overhead rates are generally useful for all of the following purposes, except:
A) product costing.
B) estimating production levels.
C) price determination.
D) inventory valuation.

Accepted Answer

Predetermined overhead rates are used for allocating manufacturing overhead costs to products, which helps in product costing, price determination, and inventory valuation. They are not used for estimating production levels; instead, production levels are often an input in calculating these rates.

Question 16

It is not necessary in the control phase of budgeting to:
A) decide on management action.
B) compare actual performance with budget estimates.
C) provide timely information to management.
D) investigate all variances.

Accepted Answer

While it is important to investigate significant variances, it is not necessary to investigate all variances in the control phase of budgeting. The focus should be on identifying the causes of significant variances and taking actions to address them.

Question 17

If estimated direct raw materials and direct labour costs are $50 000 in total, what is the direct cost per unit if forecast production is 5000 units?
A) $10
B) $25
C) $20
D) $15

Accepted Answer

The direct cost per unit is calculated by dividing the total estimated direct costs by the forecast production units. $50,000 / 5,000 units = $10 per unit.

Question 18

A) $185 000.
B) $200 000.
C) $215 000.
D) $235 000.

Accepted Answer

The answer of 
A) $185 000.
B) $200 000.
C) $215 000.
D)...

Question 19

If the cost object is the product, which of the following labour costs would be most likely to be classified as direct labour?
A) General manager's salary
B) Accounting staff's salaries
C) Maintenance staff's wages
D) Machine operator's wages

Accepted Answer

Direct labour costs are those that can be directly traced to the production of a product. Machine operator's wages are most likely to be directly involved in the production process, making them a direct labour cost. The general manager's salary and accounting staff's salaries would be considered indirect labour costs because they do not directly contribute to the production of the product. The maintenance staff's wages may be a combination of both direct and indirect labour costs, as they may be involved in both maintaining the production equipment and helping with the production process itself.

Question 20

A company expects to begin the coming year with 6000 units of Product DD in finished goods inventory. It expects to sell 85 000 units of the product and end the year with 8000 units in finished goods inventory. Each unit of product DD requires 4kgs of Material X. The company expects to have 4000 kg of Material X on hand at the beginning of the coming year and wishes to end the year with 6000 kg in inventory. How many kilograms of Material X must the company purchase during the year?
A) 250 000
B) 400 000
C) 300 000
D) 350 000

Accepted Answer

The company needs to produce 87,000 units (85,000 sold + 8,000 ending inventory - 6,000 beginning inventory). Each unit requires 4 kg of Material X, so 348,000 kg are needed for production. Adding the desired ending inventory of 6,000 kg and subtracting the beginning inventory of 4,000 kg, the company must purchase 350,000 kg of Material X.

Quiz 12: Budgeting for Planning and Control

Stockport Manufacturing is preparing its purchases budget for the 2nd quarter of the year. The following information is given in units. Beginning inventory = 350 Ending inventory = 425 Sales forecast for second quarter = 950 How many units should be purchased in the second quarter?

The technique in which budget variables are altered and the effect of the changes on the income statement and the balance sheet are recorded is known as:

The budget that should be prepared before the others listed is:

Which of these is not part of the control phase of budgeting?

Which of these account balances is not reported on the balance sheet?

An example of a fixed factory overhead cost is:

DigiSnaps plans to produce 65 000 units per month during 2014. Sales are projected at 55 000 for January and will increase 5% per month thereafter. There are 2000 units on hand at 1 January 2014. How many units will be on hand at 28 February 2014?

Budgeted direct materials purchases in units equals:

It is estimated that direct materials, direct labour and factory overhead for the period will total $500 000. If work in process at the start is $35 000 and estimated work in process at the end is $40 000, the cost of goods manufactured is:

Which of the following is a typical example of a variable cost?

Predetermined overhead rates are generally useful for all of the following purposes, except:

It is not necessary in the control phase of budgeting to:

If estimated direct raw materials and direct labour costs are $50 000 in total, what is the direct cost per unit if forecast production is 5000 units?

If the cost object is the product, which of the following labour costs would be most likely to be classified as direct labour?