Reference no: EM131768775

1. Which of the following is not a strong reason for budgeting?

a. budgets provide a benchmark for judging performance.

b. budgeting requires little effort by non-accounting managers.

c. budgeting requires management to plan.

d. budgeting requires coordination among the functional areas of the firm.

2. Zero-based budgeting forces managers to:

a. identify and prioritize the activities that are carried out in their departments.

b. justify all of their expenditures for each budget period.

c. both A and B.

d. none of these.

3. The key data element on which the entire budget is based is the:

a. sales/revenue forecast.

b. income statement budget.

c. cash budget.

d. balance sheet forecast.

4. The cash budget is especially important to a firm when:

a. there is not a lot of confidence in the sales forecast.

b. it has a relatively large amount of operating cash.

c. the P/E ratio has been trending downwards.

d. it may have to negotiate a short-term bank loan.

5. Which of the following is not an important factor to consider when preparing a sales forecast?

a. the state of the economy.

b. seasonal demand variations.

c. a change in the management team.

d. competitors' actions.

6. The raw materials budgeted to be purchased for the period is equal to:

a. ending inventory + raw material used   beginning inventory.

b. ending inventory + ending inventory   raw material used.

c. beginning inventory   ending inventory + raw material used.

d. beginning inventory + raw material used   ending inventory.

7. Which of the following is the last budgeted financial statement to be prepared?

a. budgeted income statement.

b. budgeted balance sheet.

c. cash budget.

d. it doesn't matter which one is prepared last.

8. A cash budget would not include:

a. sale of common stock.

b. payment of dividends.

c. payment of property taxes.

d. plant and building depreciation.

9. A key to estimating an accurate amount of cash to be collected from sales is:

a. the accuracy of the sales forecast.

b. the accuracy of the estimated collection patterns for sales.

c. both a and b are keys.

d. neither a nor b are keys.

10. Developing a standard cost for a product or service will usually involve:

a. efforts of cost accounting personnel only.

b. focusing only on variable costs.

c. the same kind of communication involved in the overall budgeting process.

d. concentrating on historical costs and performance levels.

11. An example of a cost that is noncontrollable in the short run is:

a. direct labor.

b. property taxes.

c. raw materials.

d. supervisors salaries.

12. If the actual level of activity is different from the budgeted level, a _________ budget is prepared for the actual level of activity:

a. continuous.

b. zero-based.

c. master.

d. flexible.

13. When an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization:

a. all expenses should be allocated to the segments.

b. common fixed expenses should be allocated to the segments.

c. only direct revenues and direct expenses should be assigned to segments.

d. direct fixed expenses should be subtracted as one amount in the "total" column.

14. Val's travel budget for October was $720, based on her plan to drive 3,000 miles at a cost of $0.24 per mile. During October, she actually drove 2,800 miles at a total cost of $700. A flexed budget performance report would show a variance of:

a. $ 50 F

b. $ 20 F

c. $ 28 U

d. $ 30 U

15. If it is to be most useful for control purposes, what variance should be reported to the supervisor responsible for the number of pounds of corn syrup used in the manufacture of a candy bar?

a. raw material price variance, expressed in cents per pound.

b. raw material usage variance, expressed as a total cost for the month.

c. raw material usage variance, expressed in total pounds for the month.

d. raw material usage variance, expressed in total pounds for the week.

16. The part of the variable overhead budget variance due to the difference between actual hours required and standard hours allowed for the work done is called the:

a. variable overhead spending variance.

b. variable overhead budget variance.

c. variable overhead efficiency variance.

d. variable overhead volume variance.

17. The part of the variable overhead budget variance due to the difference between actual variable overhead cost and the standard cost allowed for the actual inputs used is called the:

a. variable overhead spending variance.

b. variable overhead budget variance.

c. variable overhead efficiency variance.

d. variable overhead volume variance.

18. A favorable materials quantity variance would occur if:

a. more material is purchased than is used.

b. actual pounds of materials used were less than the standard pounds allowed.

c. actual labor hours used was greater than the standard labor hours allowed.

d. actual pounds of materials used was greater than the standard pounds allowed.

19. April Corporation developed the following per-unit standards for its product: 2 pounds of direct materials at $3.75 per pound. Last month, 2,000 pounds of direct materials were purchased for $7,600. The direct materials price variance for last month was:

a. $3,800 favorable.

b. $200 favorable.

c. $100 unfavorable.

d. $200 unfavorable.

20. A set of integrated financial and operating performance measures that communicate an organization's priorities associated with achieving strategic goals is known as a:

a. balanced scorecard.

b. segment report.

c. responsibility report.

d. master budget.

21. The method of evaluating financial data that change under different courses of action is called:

a. financial statement analysis.

b. break-even analysis.

c. incremental analysis.

d. cost-benefit analysis.

22. A sunk cost is a cost that:

a. has been incurred and cannot be eliminated.

b. is never relevant in decision-making.

c. is never a differential cost.

d. all of these.

23. _____________ costs between two alternative projects are those that would result from selecting one alternative instead of the other:

a. allocated.

b. differential.

c. sunk.

d. irrelevant.

24. The potential rental value of space used in the manufacturing process:

a. is a variable production cost.

b. is an unavoidable production cost.

c. is a sunk production cost.

d. is an opportunity cost if production is not outsourced.

25. Greenland Sports, Inc. has been asked to submit a bid to the National Hockey League on supplying 1,000 pairs of professional quality skates. The cost per pair of skates has been determined as follows:

Other non-manufacturing costs associated with each pair of skates are:

Assume the commission on the sale of skates to the National Hockey League would be reduced to $15 per pair and that available production capacity exists to produce the 1,000 pairs of skates, the lowest price the firm can bid is some price greater than:

a. $185.

b. $190.

c. $215.

d. $225.

26. When the present value analysis of a proposed investment results in an indication that the proposal has a rate of return greater than the cost of capital, the investment might not be made because:

a. the quantitative analysis indicates that it should not be made.

b. management's assessment of qualitative factors overrides the quantitative analysis.

c. the timing of the cash flows of the investment will not be as assumed in the present value calculation.

d. post-audits of prior investments have revealed that cash flow estimates were consistently less than actual cash flows realized.

27. Depreciation expense is not a cash flow item but it will affect the calculation of which cash flow item?

a. initial investment.

b. income taxes.

c. salvage value.

d. working capital.

28. Discounting a future cash inflow at an 8% discount rate will result in a higher present value than discounting it at a:

a. 7% rate.

b. 8% rate.

c. 9% rate.

d. All of these.

29. If the net present value of the investment is $8,510, then:

a. the rate of return is less than the cost of capital.

b. the present value of the cash flows are more than the investment.

c. the cost of capital is higher than the internal rate of return.

d. the present value of the cash flows is $8,510 less than the investment.

30. If an asset costs $16,000, has an expected useful life of 8 years, is expected to have a $2,000 salvage value and generates net annual cash inflows of $2,000 a year, the cash payback period is

a. 8 years.

b. 7 years.

c. 6 years.

d. 5 years.