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One of the distinct advantages of a budget is that it can help uncover potential bottlenecks before they occur. T or F
When preparing a materials purchase budget, desired ending inventory is deducted from the total needs of the period to arrive at materials to be purchased. T or F
The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements. T or F
Self-Imposed budgets are those that are prepared by top management and then assigned to other managers within the organization. T or F
The materials purchase budget:
A. is the beginning point in the budget process
B. must provide for desired ending inventory as well as for production
C. is accompanied by a schedule of cash collections
D. is completed after the cash budget
The budget or schedule that provides necessary input data for the direct labor budget is the;
A. raw materials purchases budget
B. production budget
C. schedule of cash collections
D. cash budget
Which of the following budgets are prepared before the sales budget?
A. YES YES
B. YES NO
C. NO YES
D. NO NO
The master budget process usually begins with the:
A. production budget
B. operating budget
C. sales budget
D. cash budget
Which of the following is not a benefit of budgeting?
A. It uncovers potential bottlenecks before they occur.
B. It coordinates the activities if the entire organization by integrating the plans and objectives of the various parts.
C. It ensures that accounting records comply with GAAP.
D. It provides benchmarks for evaluating subsequent performance.
Parlee Company's sales are 30% in cash and 70% on credit. 60% of the credit sales are collected in the month of sale, 25% in the month following sale and 12% in the second month following sale. The remainder are noncollectable. The following are budgeted sales data;
Total sales: Jan $60,000 - Feb $70,000 - March $50,000 - April $30,000
Total cash receipts in April would be budgeted to be;
D. $36, 230
The PDQ Company makes collections on credit sales according to the following schedule:
25% month of sale 70% month after sale 4% 2nd month after sale
The following sales are budgeted;
April $100,000- May $120,000 - June $110,000
Cash collection in June would be:
Pardee Co plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units must be produced during the month?
A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm. T or F
In the manufacturing overhead budget, the non-cash charges (such as depreciation) are added to the total budgeted MOH to determine the expected cash disbursements for MOH. T or F
The main difference between a flexible budget and a static budget is that a flexible budget does not contain fixed costs. T ot F
A problem with directly comparing a static planning budget to actual costs is that this comparison fails to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled. T or F
A planning budget is prepared before the period begins and is valid for only the planned level of activity. T or F
A revenue variance is unfavorable if the actual revenue is less than what the revenue should have been for the actual level of activity for the period. T or F
When the activity measure is the number of units sold, the revenue variance is unfavorable id the average actual selling price is less than expected. T or F
A favorable spending variance occurs when the actual cost is less than the amount of that cost in the flexible budget. T or F
A static planning budget is suitable for planning and evaluating how well costs are controlled. T or F
If the actual level of activity is 4% less than planned, then the costs in the static budget should be reduces by 4% before comparing them to the actual costs/ T or F
A flexible budget is a budget that:
A. is updated with actual costs as they occure during the period
B. is updated to reflect the level of activity during the pay period
C. is prepared using a computer spreadsheet
D. contains only variable production costs
Marchi Family Inn is a B&B, here is most recent budget;
Supplies $156 Laundry $364
Utilties $250 Salaries and Wages $4,480, Depreciation $ 1,330
Total OH costs $6,580
The Inn VOHR is driven by number of guests. What would the budgeted OH cost if 70 guests?
A. $ 42,460
Snow's costs formula for its vehicle operating cost s $1,240 per month plus $348 per snow day. For December, the co planned for 12 now days but the actual was 14 snow days. The actual operating cost for the month was $6330. The vehicle operating cost in the planning budget for Dec is;
Entler's costs formula for its supplies is $2,250 per month plus $16 per frame. For June, the planned activity was 502 frames, but the actual was 497 frames. The actual supplies were $10, 580. The supplies in the planning budget is:
Snow's costs formula for its vehicle operating cost is $2,310 per month plus $317 per snow day. For November, the planned activity was 18 snow days but the actual was 20. The actual vehicle operating cost for the month was $8,730. The activity variance for the vehicle operating cost in Nov was:
A $714 U
B $714 F
C $634 F
D $634 U
Air uses two measures of activity, flights and passengers, in the cost formulas. The cost formula for planned operating costs is $31,400 per month plus $2,148 per plight plus $7 per passenger. The planned activity for April is 89 flights and 261 passengers but the actual was 84 flights and 260 passengers. The actual cost for plane operating costs in April was $204,810. the spending variance for plane operating costs is:
A $8,842 U
B $19,589 F
C $19,589 U
D $8,842 F
A flexible budget performance report should contain fixed as well as variable and mixed costs. T or F
In standard costing, practice standards can be used to forecast cash flows and to plan inventory, as well as to signal abnormal deviation in costs. T or F
In standard costing, the standard quantity allowed refers to the output that should have been achieved based on the planned inputs for the period. T or F
Quantity standards indicate how much of an input should ne used for manufacturing a unit of product or in providing a unit of service. T or F
Ideal standards can only be attained under the best circumstances and allow for no work interruptions. T or F
Purchases of poor quality materials will generally result in a favorable materials price variance and an unfavorable labor rate variance. T or F
From a standpoint of cost control, the most effective time to recognize materials price variances is when the materials are place into production. T or F
The materials quantity variance is computed based on the amount of materials purchased during the period. T or F
The variable OH efficiency variance measures how efficiently variable OH resources were used. T or F
Whoever is responsible for the control of the denominator activity in the POHR should also be responsible for the VOHEV. T or F
The standards that allow for no machine breakdowns or other work interruptions and that may require peak efficiency at all time are referred to as:
A. normal standards
B. practical standards
C. ideal standards
D. budgeted standards
Which of the following statements concerning practical standards is incorrect?
A. Practical standards can be used for product costing and cash budgeting
B. Practical standards can be attained by the average worker
C. When practical standards are used, there is no reason to adjust standards if an old machine is replaced by a newer faster machine/
D. under practical standards, large variances are less likely than under ideal variances.
The general model for calculating quantity variance is:
A. AQ of inputs used x (AP - SP)
B. SP x (AQ of inputs used - SQ allowed for output)
C. (AQ of inputs used at AP) - SQ allowed for output at SP)
D. AP x (AQ of inputs used - SQ allowed for output)
An unfavorable materials quantity variance indicates that:
A. actual usage of material exceeds the standard material allowed for output
B. standard material allowed for output exceeds the actual usage of material
C. actual material price exceeds standard price
D. standard material price exceeds the actual price
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