1) A company can expect to receive which of the following benefits when it starts its budgeting process? a) The budget provides managers with a benchmark against which to compare actual results for performance evaluation b) The planning required to develop the budget helps managers foresee and avoid potential problems before they occur The budget helps motivate employees to achieve sales growth and cost reduction goals d) All of the above 2) A company prepares afive year budget. The budget would be considered a) a) Strategic budget b) Operational Manter budet d) Flexible budget Use the following data for questions 3-6 Donovan Company incurred the following costs while producing 500 units: direct material, $10 per unit; direct labor $25 per unit; variable manufacturing overhead, $15 per unit totalfwed manufacturing overhead costs $100 a ble seling and administrative cost, $5 per unit:totalfred selling and administrative costs, 2,00. There are no beginning inventories 3) What is the unit product cost using variable costing? a sso per unit b) $55 per unit Sperunt diperunt 4 What is the operating income using absorption costing units are sold for $100 each? a $50 b) $55 SO d) SRO 5) What is the operating income using absorption costing if 500 units are sold? a) $500 b) $2,500 c) $2,750 d] $5,000 6) What is the operating income using variable costing if 450 units are sold for $100 each a) $2,750 b) $5,000 c) $500 d) $2,500 7) Ifa company increases its fixed cost for product B, then the contribution margin a) Increase b) Decrease c) Remain the same d) More Information is needed 8) A company must decide which one of the following four products to manufacture Product sale price variable cost direct labor hrs/unit $10 15 0.5 Which product will result in the highest contribution margin per hou a) M b) N c) O d) P 9) The process of creating a formal plan and translating goals into quantitative form a) Process costing b) Activity-based costing c) Budgeting d) Variance analysis 10) Which one of the following best describes the role of top management in budgeting process? Top management a) Should be involved only in the approval process b) Lacks the detailed knowledge of the daily operations and should limit its involvement c) Needs to be involved, including using the budget process to communicate goals d Needs to separate the budgeting process and the business planning process into two separate processes 11) All the following are considered operating budgets except a) Cash budget b) Materials budget c) Production budget d) Capital budget 12) The major objectives of any budget system are to a) Define responsibility centers, provide a framework for performance evaluation and promote communication and coordination among organizations segments b) Define responsibility centers, facilitate the fixing of blame for missed budget predictions, and ensure goals congruence between superiors and subordinates c) Foster the planning of operations, provide a framework for performance evaluation, and promote communication and coordination among organization segments 13) Which one of the following statements regarding the difference between a flexible budget and a static budget is true? a) A flexible budget primarily is prepared for planning purposes, but a static budget is prepared for performance evaluation b) A flexible budget provides cost allowances for different levels of activity, but a static budget provides costs for one level of activity c) A flexible budget includes only variable costs whereas a static budget includes only fixed cost d) Variances will always be larger with a flexible budget than with a static budget 14) When using a variable costing system, the contribution margin discloses the excess of a) Revenues over foxed cost b) Projected revenues over the breakeven point c) Revenues over variable cost d) Variable cost over fixed cost 15) In an income statement prepared as an internal report using variable costing method, variable selling and administrative expenses are a) Not used b) Treated the same as fixed selling and administrative expenses c) Used in the computation of operating income but not in the computation of contribution margin d) Used in the computation of contribution margin