1. Which of the following is an inventoriable cost under

5. Green Company's variable expenses are 75% of sales. At a sale s level of
$400,000, the company's degree of operating leverage is 8. At th is sales
level, fixed expenses equal which of the following?
6-21
A) $ 87,500 .
B) $100,000.
C) $ 50,000.
D) $ 75,000.
7-4
1. Which of the following is an inventoriable
cost under variable costing?
A. Variable manufacturing overhead
B. Fixed manufacturing overhead
C. Variable selling & administrative costs
D. Fixed selling & administrative costs
E. None of the above
2. Gomez’s finished goods inventory
increased during the year. Therefore income
reported under absorption costing:
A. Will be higher than that reported under
variable costing .
B. Will be lower than that reported under
variable costing.
C. Will be less than that reported under
absorption costing in the previous period.
D. Can’t determine based on the information
provided.
7-7
7-14
4. Jones Company (JC) began operations in 2002 and at the
end of the year they had 10,000 units in ending inventory.
JC uses absorption costing and the fixed overhead cost per
unit in 2002 was $6. In 2003 Jones produced 32,000 units
and sold 40,000 units. Total fixed overhead costs in 2002
and 2003 were $300,000. How much less will absorption
costing income be than variable costing income in 2003?
A. $60,000
B. $18,750
C. $41,250
D. None of the above.
5. Which of the following formulas can often
reconcile the difference between absorption
and variable costing net income?
A. Change in inventory units x pre -determined
variable overhead rate per unit.
B. Change in inventory units x pre determined fixed overhead rate per unit.
C. Change in inventory units x pre -determined
total overhead rate per unit.
D. None of these formulas can be used to
reconcile the difference.
7-18
1.
Wilson Company prepares budgets on an on -going basis with a new
quarter added to the budget as the current quarter is completed. This
type of budget is commonly known as:
C.
revised budget.
quarterly budget.
pro-forma budget.
D.
continuous budget.
A.
B.
2. Consider the following statements about zero based budgeting:
I. The budget for all key activities in the organization is initially set to the level
that existed last year.
II. The approach avoids carrying forward inefficiencies from prior years.
III. The approach is more applicable to discretionary rather than committed
expenses.
Which of the above statements is true?
C.
I., II. and III.
II. and III. only.
II. only.
D.
III. only.
A.
B.
3. Manager A. increased budgeted property tax expense by 2% when
informed that a rate hike by local authorities was likely for ne xt year.
Manager B reduced the sales budget by 4% when informed of recent
aggressive price cuts by a key competitor. Manager C who supervi ses
employees of widely varying skill used the highest wage rate in the
department when preparing her labour budget.
Which of the preceding managers is most likely building slack in
the budget?
A.
B.
C.
D.
4.
Manager A
Manager B
Manager C
None of the above
Which of the following conditions are necessary for a manager to
create budget slack?
i. The manager knows more about his area of budget
responsibility than his or her superior.
ii. The manager is allowed to participate in setting his or her
budget.
iii. The manager has an incentive to perform better than his or
budget.
A.
B.
C.
D.
ii only
ii and iii
iii only
i, ii and iii
her
5. Which of the following would have no effect on an organizatio
budget?
C.
Sales revenues.
Purchase of new production equipment.
Repayment of outstanding loans.
D.
Straight line depreciation of the factory building.
A.
B.
n’s cash
6. Coleman Inc. anticipates sales of 50,000 units, 48,000 units and 51,000 units in
July, August and September respectively. Company policy is to maintain an
ending finished goods inventory equal to 40% of the following month’s sales. On
the basis of this information, how many units would the company plan to produce
in August?
A.
B.
C.
D.
46,800
49,200
49,800
52,200
7. Franklin makes all purchases on account subject to the following payment
pattern: paid in the month of purchase, 30%; paid in the first month following
purchase, 60%; paid in the second month following purchase, 10%.
If purchases for January, February and March were $200,000,
$180,000 and $230,000 respectively, what was the firm’s budgeted
account payables balance on March 31?
A.$161,000
B.$179,000
C.$197,000
D.$199,000
8. One-half of Vern’s sales are cash sales and the other half are sales on account.
All sales on account are subject to the following collection pattern: 20% in the
month of sale; 70% collected in the first month after sale; and 10% in the second
month after sale.
If total sales for October, November and December were $140,000,
$120,000 and $100,000 respectively, what will cash receipts be f or
December?
A.$90,000
B.$96,000
C.$99,000
D.$109,000
9. Following is a list of potential issues that a Canadian company with operations
in foreign countries could consider when preparing their budget:
i. Foreign currency exchange rates
ii. Inflation rates
iii. Economic conditions and government policies (e.g., taxes)
iv. The amount of profit from foreign locations that can be transferred back to
Canada
Which of the above issues should be considered?
i, ii and iii
B. i. and iii
C. i. and ii
D. All of the above
A.
10-6
1.
The materials price variance should be calculated using
the:
A. The actual quantity of raw materials purchased
B. The quantity of raw materials that should have been
used in production
C. The quantity of raw materials actually used in
production
D. None of the above
10-8
2.
Which of the following situations cannot occur together
during the same accounting period:
A. Unfavourable labour rate variance and favourable
labour efficiency variance
B. Unfavourable labour efficiency variance and
favourable materials quantity variance
C. Favourable labour rate variance and unfavourable
total labour variance
D. None of the above, all of these situations are
possible
3.
The purchasing manager at Jones Company decided to reduce direct
material costs by purchasing slightly lower quality materials in
October of this year. In addition to the materials price varianc e,
which of the following variances could plausibly be affected by this
decision?
I.
II.
III.
IV.
Direct materials quantity variance
Direct labour rate variance
Direct labour efficiency variance
Variable overhead efficiency variance
A. All of the above
B. I., II., and III.
C. I., III., and IV.
D. I. And III.
10-11
4.
Bozo Enterprises used 14,000 labour hours to produce 7,500 pairs of
clown shoes in October. The standard amount of direct labour is two
hours per pair of shoes. Actual direct labour costs were $158,200 in
October and the standard cost of direct labour is $11 per hour.
Bozo’s labour rate variance is:
10-13
A. $4,200 u
B. $4,000 u
C. $4,500 u
D. None of the above
5.
Collins Corporation had a favourable direct-labour efficiency
variance of $5,250 for the month of October. The actual wage rat
was $.50 more than the standard rate of $10.00. If the company’s
standard hours allowed for actual production totaled 9,000, how
many hours were worked during October?
A. 8,475
B. 8,500
C. 9,500
D. None of the above
10-15
e
10-21
6. The following data are for the Kershaw Company for April:
Budgeted labour mix at budgeted prices for actual output achieve
d:
3,825 skilled hours at $16 per hour
1,275 unskilled hours at $12 per hour
5,100 total hours
Actual results:
4,000 skilled hours at $19 per hour
1,000 unskilled hours at $9 per hour
5,000 total hours
What is the yield variance for both types of labour together?
A. $1,500 favourable
B. $1,000 unfavourable
C. $500 favourable
D. None of the above
7. Consider the following statements about variance
investigations:
I. Variance investigation involves only unfavourable variances.
II. Variance investigation should be based on a cost-benefit
analysis.
III. Variance investigation guidelines could be based on the dollar
magnitude of the variance or the % by which actual amounts
differ from standard costs.
Which of the above statements are true?
A. I.
B. II.
C. III.
D. II. and III.
10-27