4Which approach is most likely to result in employee buy-in to the budget?

A.top-down approach

B.bottom-up approach

C.total participation approach

D.basing the budget on the prior year

Solution

Which approach requires management to justify all its expenditures?

A.bottom-up approach

B.zero-based budgeting

C.master budgeting

D.capital allocation budgeting

Solution

Which of the operating budgets is prepared first?

A.production budget

B.sales budget

C.cash received budget

D.cash payments budget

Solution

The direct materials budget is prepared using which budget's information?

A.cash payments budget

B.cash receipts budget

C.production budget

D.raw materials budget

Solution

Fill in the blanks: A flexible budget summarizes _______ and _______ for various volume levels by adjusting the _______ costs for the various levels of activities. The _______ costs remain the same for all levels of activities.

Solution

.

What information is included in the capital asset budget?

Solution

Why does budget planning typically begin with the sales forecast?

This variance is the difference involving spending more or using more than the standard amount.

A.favorable variance

B.unfavorable variance

C.no variance

D.variance

Solution

This variance is the difference involving spending less, or using less than the standard amount.

A.favorable variance

B.unfavorable variance

C.no variance

D.variance

Solution

What are some possible reasons for a material price variance?

A.substandard material

B.labor rate increases

C.labor rate decreases

D.labor efficiency

Solution

What are some possible reasons for a labor rate variance?

A.hiring of less qualified workers

B.an excess of material usage

C.material price increase

D.utilities usage change

Solution

When is the labor rate variance unfavorable?

A.when the actual quantity used is greater than the standard quantity

B.when the actual quantity used is less than the standard quantity

C.when the actual price is greater than the standard price

D.when the actual price is less than the standard price

Solution

When is the labor rate variance favorable?

A.when the actual quantity used is greater than the standard quantity

B.when the actual quantity used is less than the standard quantity

C.when the actual price paid is greater than the standard price

D.when the actual price is less than the standard price

Solution

When might a favorable variance not be a good outcome?

When might an unfavorable variance be a good outcome?

You are explaining time value of money factors to your friend. Which factor would you explain as being larger?

A.The future value of $1 for 12 periods at 6% is larger.

B.The present value of $1 for 12 periods at 6% is larger.

C.Neither one is larger because they are equal.

D.There is not enough information given to answer this question.

Solution

If you are saving the same amount each month in order to buy a new sports car when the new models are released, which of the following will help you determine the savings needed?

A.future value of one dollar

B.present value of one dollar

C.future value of an ordinary annuity

D.present value of an ordinary annuity

Solution

You want to invest $8,000 at an annual interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years?

A.future value of one dollar

B.present value of one dollar

C.future value of an ordinary annuity

D.present value of an ordinary annuity

Solution

When using the NPV method for a particular investsment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________.

A.the discount rate used was too high

B.the investment provides an actual rate of return greater than the discount rate

C.the investment provides an actual rate of return equal to the discount rate

D.the discount rate is too low

Solution

In practice, external factors can impact a capital investment. Give a current external factor that may currently impact or cause instability of capital spending either here or abroad.

O'Malley, Inc. has a capacity of producing 300,000 units a year and sells them at $28 a unit. At present O'Malley is selling 250,000 units. A foreign distributor has offered to purchase 40,000 units at $20 a unit. The customer will pay all freight costs and no commissions will be paid on this order, so variable selling costs will be reduced by 40%.

The sales manager has collected the following data on O'Malley's operating costs:

Per Unit

Direct Materials$ 3.00

Direct labor7.50

Variable overhead6.00

Variable selling3.50

Fixed overhead4.00

Fixed administration 1.50

Total$ 25.50

Determine if the order should be accepted or rejected.

Consider a co. that manufactures and sells personal computers.Recently they lowered the prices dramatically.They are very efficient, keep only 5 days of inventory, collect all A/R within 30 days and suppliers are paid up to 60 days.A competitior stated that they are causing a price war and that is dumb.What do you think?

Joe's Jewellery has 45 stores in major malls acround the country.They are considering starting an online business which will require a substantial investment in technology.What are benefits they could not quantify using NPV?