4. Ossmann Enterprises reports year-end information from 20X4 as follows: Sales (80,000 units) $480,000 Cost of goods sold 320,000 Gross margin 160,000 Operating expenses 130,000 Operating income $ 30,000 Ossmann is developing the 20X5 budget. In 20X5 the company would like to increase selling prices by 8%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost. What is budgeted sales for 20X5? (Points : 4) $518,400 $533,333 $466,560 $432,000 5. Dan and Donna Enterprises are using the kaizen approach to budgeting for 20X5. The budgeted income statement for January 20X5 is as follows: Sales (84,000 units) $500,000 Less: Cost of goods sold 300,000 Gross margin 200,000 Operating expenses (includes $50,000 of fixed costs) 150,000 Operating income $ 50,000 Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. What is budgeted cost of goods sold for March 20X5? (Points : 4) $294,030 $294,000 $300,000 $297,000 6. Responsibility accounting: (Points : 4) is a system that measures the plans, budgets, actions, and actual results of a responsibility center is an arrangement of lines of responsibility within the organization explicitly incorporates continuous improvement anticipated during the budget period examines how a result will change if the original plan is not achieved 7. A PRIMARY consideration in assigning a cost to a responsibility center is: (Points : 4) whether the cost is fixed or variable whether the cost is direct or indirect who can best explain the change in that cost where in the organizational structure the cost was incurred 8. Building in budgetary slack includes: (Points : 4) overestimating budgeted revenues underestimating budgeted costs making budgeted targets more easily achievable All of these answers are correct. 9. Fiscal Company has the following sales budget for the last six months of 20X5: July $100,000 October $ 90,000 August 80,000 November 100,000 September 110,000 December 94,000 Historically, the cash collection of sales has been as follows: 65% of sales collected in the month of sale, 25% of sales collected in the month following the sale, 8% of sales collected in the second month following the sale, and 2% of sales are uncollectible. Cash collections for October are: (Points : 4) $58,500 $92,400 $99,500 $88,200 10. Abernathy Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit. Actual Budgeted Units sold 92,000 units 90,000 units Variable costs $450,800 $432,000 Fixed costs $ 95,000 $100,000 What is the static-budget variance of revenues? (Points : 4) $20,000 favorable $20,000 unfavorable $2,000 favorable $2,000 unfavorable 11. The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Wooden Figurines Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (units) 13,000 12,000 Sales revenues $257,500 $ $250,000 Variable costs 154,000 $ 175,000 Contribution margin 103,500 $ 75,000 Fixed costs 50,500 $ 49,500 Operating Profit $ 53,000 $ $ 25,500 The flexible-budget variance for variable costs is: (Points : 4) $21,000 favorable $13,583 unfavorable $35,583 unfavorable $35,583 favorable 12. When standards are used to develop a budget: (Points : 4) past inefficiencies are excluded benchmarking must also be used information is available at a low cost flexible-budget amounts are difficult to determine 13. Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In 2008, AVO estimated the following standard costs for one of their most well loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples. Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour. September's direct material flexible-budget variance is: (Points : 4) $100.00 unfavorable $100.00 favorable $75.00 unfavorable None of these answers are correct. 14. A purchasing manager's performance is BEST evaluated using the: (Points : 4) direct materials price variance direct materials flexible-budget variance direct manufacturing labor flexible-budget variance affect the manager's action has on total costs for the entire company 15. A favorable efficiency variance for material-handling labor-hours per batch could result from: (Points : 4) inefficient production-floor layouts compared to those expected when preparing the budget materials-handling labor waiting to pick up materials well-trained and experienced material-handling employees lower wages than planned for material-handling labor 16. Ensuring benchmark numbers are comparable can be difficult because differences can exist across companies with: (Points : 4) overall company strategy depreciation methods inventory methods All of these answers are correct. 17. Nonfinancial performance measures: (Points : 4) are usually used in combination with financial measures for control purposes are used to evaluate overall cost efficiency allow managers to make informed tradeoffs are often the sole basis of a manager's performance evaluations 18. Hector's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Flexible Variance Variance Budget Price Efficiency Material A $20,000 $1,000 U $1,200 F Material B 30,000 500 F 800 U Material C 40,000 1,400 U 1,000 F The actual amount spent for Material A was: (Points : 4) $18,800 $20,200 $19,800 $21,000 19. The MAJOR challenge when planning fixed overhead is: (Points : 4) calculating total costs calculating the cost-allocation rate choosing the appropriate level of capacity choosing the appropriate planning period 20. Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 15,000 units Budgeted machine-hours 5,000 hours Budgeted variable manufacturing overhead costs for 15,000 units $161,250 Actual output units produced 22,000 units Actual machine-hours used 7,200 hours Actual variable manufacturing overhead costs $242,000 What is the flexible-budget variance for variable manufacturing overhead? (Points : 4) $5,500 favorable $5,500 unfavorable $4,300 favorable None of these answers is correct. 21. When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the MOST likely result would be to report a(n): (Points : 4) favorable variable overhead spending variance unfavorable variable overhead efficiency variance favorable fixed overhead flexible-budget variance unfavorable production-volume variance 22. Russo Corporation manufactured 16,000 space heaters during November. The overhead cost-allocation base is $15.75 per machine-hour. The following variable overhead data pertain to November: Actual Budgeted Production 16,000 units 18,000 units Machine-hours 7,875 hrs 9,000 hrs Variable OH per mach hr $15.50 $15.75 What is the flexible-budget amount? (Points : 4) $124,031.30 $126,000.00 $124,000.00 $139,500.00 23. Russo Corporation manufactured 16,000 space heaters during November. The overhead cost-allocation base is $15.75 per machine-hour. The following variable overhead data pertain to November: Actual Budgeted Production 16,000 units 18,000 units Machine Hrs 7,875 hrs 9,000 hrs Variable OH $ machine Hr $15.50 $15.75 What is the total variable overhead variance (Points : 4) $3,937.50 unfavorable $1,968.75 unfavorable $3,937.50 favorable $1,968.75 favorable 24. The amount reported for fixed overhead on the static budget is also reported: (Points : 4) as actual fixed costs as allocated fixed overhead on the flexible budget Both B and C are correct. 25. Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March: Actual Static Bdgt Production 25,000 units 24,000 units Machine Hrs 6,100 hrs 6,000 hrs Fixed OH $ March $123,000 $120,000 What is the amount of fixed overhead allocated to production? (Points : 4) $120,000 $122,000 $123,000 $125,000 26. John's Football Manufacturing Company reported: Actual fixed overhead $800,000 Fixed manufacturing overhead spending variance $20,000 favorable Fixed manufacturing production-volume variance $30,000 unfavorable To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for: (Points : 4) $780,000 $790,000 $800,000 $810,000 27. Jovana Company uses a standard cost system. In March, $117,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $120,000. Which of the following variable manufacturing overhead entries would have been recorded for March? (Points : 4) Accounts Payable Control and other accounts 120,000 Work-in-Process Control 120,000 Work-in-Process Control 120,000 Variable Manufacturing Overhead Allocated 120,000 Work-in-Process Control 117,000 Accounts Payable Control and other accounts 117,000 Accounts Payable Control and other accounts 117,000 Variable Manufacturing Overhead Control 117,000 28. Marie's Decorating produces and sells a mantel clock for $100 per unit. In 20X5, 100,000 clocks were produced and 80,000 were sold. Other information for the year includes: Direct Materials $30.00 / unit Direct Mfg Labor $ 2.00 / unit Variable Mfg Costs $ 3.00 / unit Sales Commission $ 5.00 / unit Fixed Mfg Costs $25.00 / unit Admin expenses All Fixed $15.00 / unit What is the inventoriable cost per unit using variable costing? (Points : 4) $32 $35 $40 $60 29. The contribution-margin format of the income statement: (Points : 4) is used with absorption costing highlights the lump sum of fixed manufacturing costs distinguishes manufacturing costs from nonmanufacturing costs calculates gross margin 30. Under absorption costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in: (Points : 4) increasing the manager's bonus decreasing the manager's bonus not affecting the manager's bonus being unable to determine the manager's bonus using only the above information 31. Reusser Company produces wood statues. Management has provided the following information: Actual sales 80,000 statues Budgeted production 100,000 statues Selling price $20.00 per statue Direct material costs $5.00 per statue Variable manufacturing costs $1.50 per statue Variable administrative costs $2.50 per statue Fixed manufacturing overhead $2.00 per statue What is the total throughput contribution? (Points : 4) $1,500,000 $2,000,000 $720,000 $1,200,000 32. Theoretical capacity allows for: (Points : 4) preventive machine maintenance interruptions due to uncontrollable power failures rework of the expected number of defective units None of these answers is correct. 33. From the perspective of long-run product costing it is best to use: (Points : 4) master-budget capacity utilization to highlight unused capacity normal capacity utilization for benchmarking purposes practical capacity for pricing decisions theoretical capacity for performance evaluation 34. Ms. Andrea Chadwick, the company president, has heard that there are multiple breakeven points for every product. She does not believe this and has asked you to provide the evidence of such a possibility. Some information about the company for 20X5 is as follows: Total fixed mfg OH $180,000 Total other fixed expenses $200,000 Total variable mfg expenses $120,000 Total other variable expenses $120,000 Units produced 30,000 units Budgeted production 30,000 units Unitd sold 25,000 units Selling price $40 What are breakeven sales in units using variable costing? (Points : 4) 5,625 units 5,769 units 11,875 units 12,180 units 35. The following information pertains to the Bean Company: Selling price per unit $123 Std fixed mfg costs per unit $ 60 Variable selling & admin costs per unit $ 12 Standard variable mfg costs per unit $ 3 Fixed selling & admin costs $48,000 Units produced 10,000 units Units sold 9,600 units What is the absorption costing breakeven point in units? (Points : 4) 917 units 1,000 units 5,838 units 6,000 units 36. The formula for computing the breakeven point in units under variable costing includes all of the following EXCEPT: (Points : 4) total fixed costs contribution margin percentage target operating income contribution margin per unit