Multiple Choice Questions:

1) The operating income of Jut ox Inc. is $40,000 for March using both variable costing and absorption costing.

Which of the following statements must be true of Jut ox for the above statement to be true?

A) The opening inventory of March was higher than the ending inventory.

B) The units produced by Jut ox are more than the units sold in March.

C) The company's degree of operating leverage is below 1.

D) The beginning and ending inventories of the company were zero.

2) If a company uses standard absorption costing, how could a business manager exploit that accounting method in order to boost book income without violating the rules of GAAP?

A) By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing inventory, which would in turn, help boost book income.

B) By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher income.

C) By reducing inventory levels, the manager could show higher sales revenues, and thus report higher book income.

D) By building up inventory levels, fixed manufacturing costs could be "stored up" in ending inventory, the cost of goods sold would be lower, and book income would be higher.

3) Which of the following statements is true of the budgeting process?

A) It includes qualitative targets of the company, not just quantitative.

B) It is a continuous process.

C) It shows the actual performance of the business.

D) Its success is not dependent on human behavior.

4) Which of the following is an example of the planning function of a budget?

A) A budget demands integrated input from different business units and functions.

B) Employees are motivated to achieve the goals set by the budget.

C) Budget figures are used to evaluate the performance of managers.

D) The budget outlines a specific course of action for the coming period.

5) Which of the following is an example of the coordination and communication function of a budget?

A) A budget demands integrated input from different business units and functions.

B) Employees are motivated to achieve the goals set by the budget.

C) Budget figures are used to evaluate the performance of managers.

D) The budget outlines a specific course of action for the coming period.