ACCT 302 Final Exam

The major objectives of a budgeting process should include all of the following EXCEPT:

providing unyielding commitment to targets as a means to achieve a target profit

The practice of developing reasonably challenging budgets tend to help:

motivate improved performance as employees work more intensely to avoid failure

Which of the following is a financial budget?

Budgeted balance sheet

Which of the following must be produced before a budgeted income statement can be created?

Sales budget, production budget, direct labor budget and finished goods budget

Which of the following statements incorporates the principles of rolling budgeting?

Managers should roll forward their budget each time a period is complete.

Desoto manufactures custom made engines for cars. It tries to maintain an ending inventory of 10%. Sales are projected to be 2,000 engines for January, 3,000 for February, and 2,500 for March. What is the number of engines to be produced for February?

2,950

Mary’s Baskets Company expects to manufacture and sell 30,000 baskets in 2019 for $5 each. There are 4,000 baskets in beginning finished goods inventory with target ending inventory of 9,000 baskets. The company keeps no work-in-process inventory. What amount of sales revenue will be reported on the 2019 budgeted income statement?

$150,000

McBurgers is a restaurant specializing in hamburgers. Its forecasted sales of hamburger patties are 10,000 for June, 12,000 for July, and 11,000 for August. McBurgers incurs $0.10 variable selling expense and $0.05 variable administrative expense per burger. It also has fixed monthly expenses of $4,000 in property taxes and $1,500 in depreciation. What are the total administrative and selling expenses forecasted for July?

$7,300

Smith Co has projected raw materials purchases of $194,400 for quarter 1, $293,000 for quarter 2, and $328,400 for quarter 3. Smith pays for 60% of purchases in the month of purchase and 40% in the following month. If accounts payable was $81,500 at the beginning of quarter 1, what is the projected cash disbursement for quarter 2?

$253,560

Jetz Co has projected 14,000 units to be produced in November and 32,000 units for December. Each unit requires 15 pounds of input. It tries to maintain an ending inventory of 10% of the next month’s production needs. If beginning raw materials inventory was 21,000 lbs in November, what is the amount of raw materials purchases in lbs for November?

237,000

The following pertains to the Duck Decoy Department of Paralith Inc. for the third quarter. The static budget assumed 10,000 units, but actual sales were 11,000 units. Sales revenue was $238,000 (actual) vs. $230,000 (static). Variable costs were $150,000 (actual) vs. $180,000 (static). Contribution margin and fixed costs were $88,000 and $36,000 (actual), and $50,000 and $35,000 (static), respectively. Operating profit was $52,000 (actual) vs. $15,000 (static). What is the total static-budget variance?

$37,000 Favorable

The following pertains to the Duck Decoy Department of Paralith Inc. for the third quarter. The static budget assumed 10,000 units, but actual sales were 11,000 units. Sales revenue was $238,000 (actual) vs. $230,000 (static). Variable costs were $150,000 (actual) vs. $180,000 (static). Contribution margin and fixed costs were $88,000 and $36,000 (actual), and $50,000 and $35,000 (static), respectively. Operating profit was $52,000 (actual) vs. $15,000 (static). The flexible budget will report ________ for variable costs.

$198,000

Collin Inc. planned to use $153 of material per unit but actually used $140 of material per unit, and planned to make 1,100 units but actually made 910 units. What is the sales-volume variance for materials?

$29,070 favorable

Which of the following statements is true?

Paying more for materials than budgeted creates a materials price variance

Last month, 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual purchase price per pound was $0.50 more than the standard purchase price per pound, what was the materials price variance?

$37,500 unfavorable

Pumpkin Place set the following standards for their Halloween season: Standard labor hours required 900 hours; Standard labor wage rate per hour $12 per hour. Employees at Pumpkin Place ended up working 1,100 hours for a total labor cost of $14,850. What is the labor price variance?

$1,650 unfavorable

An unfavorable labor rate variance indicates which of the following?

The company spent more on labor per hour than budgeted.

Osium Company manufactured 2,000 coolers during October. The following variable overhead data relates to October: Variable overhead spending variance $1,500 Favorable; Variable overhead efficiency variance $1,200 Unfavorable. Calculate the variable overhead flexible-budget variance.

$300 favorable

An unfavorable flexible-budget variance for variable costs may be the result of ________.

using more input quantities than were budgeted

Mendel Company manufactured 4,000 chairs during June. The following variable overhead data relates to June: Budgeted variable overhead cost per unit $15; Actual variable manufacturing overhead cost $50,300; Flexible-budget amount for variable manufacturing overhead $48,000; Variable manufacturing overhead efficiency variance $770 unfavorable. What is the variable overhead spending variance?

$1,530 unfavorable

Effective planning of variable overhead costs means that managers must ________.

focus on activities that add value for the customer and eliminate nonvalue-added activities

When variable overhead spending variance is unfavorable, it can be safely assumed that the actual variable overhead cost per unit was higher than the budgeted cost per unit.

actual rate per unit of cost-allocation base is higher than budgeted rate

Lazy-Boy budgeted its fixed overhead at $5,000,000 for the year with estimated units produced of 250,000. During the year, Lazy-Boy actually produced 260,000 units and incurred fixed overhead totaling $5,150,000. The company applies fixed overhead based on the number of units produced. What is the production-volume variance for its fixed overhead?

$200,000 Favorable

Lazy-Boy budgeted its fixed overhead at $5,000,000 for the year with estimated units produced of 250,000. During the year, Lazy-Boy actually produced 260,000 units and incurred fixed overhead totaling $5,150,000. The company applies fixed overhead based on the number of units produced. What is the fixed overhead spending variance?

$150,000 Unfavorable

When making decisions, ________.

appropriate weight must be given to both quantitative and qualitative factors

With a constraining resource, managers should choose the product with the ________.

highest contribution margin per unit of the constraining resource

A product costs $600 to manufacture, $20 to market, and $10 to distribute (ship to customers). R&D costs are allocated at $40 per unit. Based on a targeted rate of return, the manager uses a mark-up of 30%. If the company uses a cost-plus pricing approach and full cost as the cost base, what is the prospective selling price?

$871

In a long-run, it is worthwhile to sell a product only if the selling price exceeds ________.

full cost of the product and a markup that provides an adequate return on capital

Which of the following is true of value engineering?

It is the process by which a systematic evaluation of all aspects of the value chain, with the objective of reducing costs and achieving a predetermined quality level.

Which of the following is a disadvantage of a dual-rate method?

It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage.

Which of the following describes who the direct allocation method allocates support-department costs?

It allocates each support-department’s costs to operating departments only.

Which of the following is true of master budgets?

Includes both financial and nonfinancial aspects of management’s plans.

Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process?

To benefit from their experience with the day-to-day aspects of running the business.

Which of the following is a component of operating budgets?

Production budget

In which order are the following developed? First to last:

A = Production budget

B = Direct materials costs budget

C = Budgeted income statement

D = Revenues budget

Revenues, Production, Direct materials costs, Budgeted income statement

A stretch budget is a budget that ________.

represents a challenging, but achievable level of performance

Jordan Company produces and sells basketballs. To guard against out-of-stock situations, the company requires that 20% of the next month’s sales be on hand at the end of each month. Budgeted sales of basketballs over the next three months are: October 80,000 units, November 120,000 units, December 100,000 units. Budgeted production for November would be:

116,000 units

Dawson Co. produces wine. The company expects to produce 2,535,000 two-liter bottles of Chablis in 2022. Dawson purchases empty glass bottles from an outside vendor. Its target ending inventory of such bottles is 77,000; its beginning inventory is 54,000. For simplicity, ignore breakage. How many bottles will Dawson need to purchase in 2022?

2,558,000

Bridgette’s Boutique has budgeted to make the following material purchases during the next four months: January $45,600; February $55,000; March $52,300; April $30,800. Bridgette pays for 60% of the purchases in the month of purchase and 40% in the following month. Accounts payable at the end of March would be:

$20,920

Management by exception is a practice whereby managers focus more closely on ________.

areas not operating as anticipated and less closely on areas that are operating as anticipated

Jalbert Incorporated planned to use materials of $11 per unit but actually used materials of $15 per unit, and planned to make 1,560 units but actually made 1,730 units. The flexible-budget amount for materials is ________.

$19,030

Which of the following could be a reason for a favorable material price variance?

The purchasing manager bargaining effectively with suppliers

Three major influences on pricing decisions are ________.

competition, costs, and customers

Which of the following is true of long-run pricing?

It is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices.

After conducting a market research study, Magnificent Manufacturing estimated that a new interior door can be sold at a target price of $240. The annual target sales volume is 21,000. Magnificent has a target operating income of 20% of sales. What is the target cost per unit for the new interior door?

$192

Jack’s Back Porch manufactures rustic tables. Jack estimates manufacturing costs to be $270 per table, consisting of 80% variable costs and 20% fixed costs. It is Jack’s policy to add a 60% markup to full costs. What per unit price will Jack’s Back Porch most likely charge for the table?

$432 per unit

Which of the following best defines the term: product life cycle?

the span of time from initial R&D on a product to when the customer service and support for the product is no longer offered