• A company has had stable sales and production for several years. Next year, sales are expected to increase by at least 50%. Assuming that the company maintains its policy for desired ending inventories of finished product and direct materials purchases, what will be the likely effect on the desired ending inventory of finished product?

.

.

. It will increase

.

.

. It will decrease

.

.

. It will stay the same

.

.

. It will be twice the size of the desired ending inventory of raw materials

.

.

. None of these

.

5 points

QUESTION 2

• A company plans on selling 400 units. The selling price per unit is $5. There are 40 units in beginning inventory, and the company would like to have 75 units in ending inventory. How many units should be produced for the coming period?

.

.

. 435

.

.

. 400

.

.

. 365

.

.

. 2,000

.

.

. 2,035

.

5 points

QUESTION 3

• A company requires 200 pounds of plastic to meet the production needs of a product. It currently has 20 pounds of plastic inventory. The desired ending inventory of plastic is 60 pounds. How many pounds of plastic should be budgeted for purchasing during the coming period?

.

.

. 200 pounds

.

.

. 240 pounds

.

.

. 260 pounds

.

.

. 280 pounds

.

.

. 160 pounds

.

5 points

QUESTION 4

• Bank loan officers would find which of the following budgets to be one of the most important in determining whether or not to give a company a loan?

.

.

. Sales budget

.

.

. Production budget

.

.

. Budgeted income statement

.

.

. Budgeted balance sheet

.

.

. Cash budget

.

5 points

QUESTION 5

• Budgeted operating income includes

.

.

. budgeted interest expense.

.

.

. budgeted income taxes.

.

.

. budgeted cost of goods sold.

.

.

. budgeted net income.

.

.

. none of these.

.

5 points

QUESTION 6

• Budgets are

.

.

. key components of planning.

.

.

. financial plans for the future.

.

.

. an identifier of objectives and the actions needed to achieve them.

.

.

. used for communication and coordination.

.

.

. all of these.

.

5 points

QUESTION 7

• Depreciation expense on sales equipment appears in a separate line on which of the following budgets?

.

.

. Cash budget

.

.

. Selling and administrative expenses budget

.

.

. Direct labor budget

.

.

. Production budget

.

.

. Overhead budget

.

5 points

QUESTION 8

• Synergy Inc. produces plastic grocery bags. Synergy has developed a static budget for the month of July based on 10,000 direct labor hours. During the quarter, the actual activity was 12,000 direct labor hours. Data for July are summarized as follows:

.

. Static budget

. (10,000 hours)

. Actual costs

. (12,000 hours)

. Direct materials cost

. $ 86,000

. $108,000

. Power

. 30,000

. 37,000

. Salary of plant supervisor

. 7,000

. 7,000

. Total

. $123,000

. $152,000

.

• What is the flexible budget amount for July?

.

.

. $142,000

.

.

. $146,200

.

.

. $171,000

.

.

. $165,000

.

.

. None of these.

.

5 points

QUESTION 9

• Montgomery Company has developed the following flexible budget formulas for its four overhead items:

. Overhead item

. Fixed Cost

. Variable rateperdirect labor hour

. Maintenance

. $10,000

. $3.00

. Power

. $1,500

. $0.30

. Indirect labor cost

.

. $12.00

. Equipment lease

. $7,000

.

. Total

. $18,500

. $15.30

.

• Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year 19,000 units were produced with the following actual costs:

. Overhead item

. Actual costs

. Maintenance

. $14,000

. Power

. $2,200

. Indirect labor cost

. $70,000

. Equipment lease

. $7,000

. Total costs

. $93,200

.

• The total budgeted overhead for an expected activity level of 10,000 units is:

.

.

. $139,400.

.

.

. $64,400.

.

.

. $124,000.

.

.

. $12,400.

.

.

. None of these.

.

5 points

QUESTION 10

• In budgeting direct labor hours for the coming year, it is important to

.

.

. multiply production in units by the direct labor hours per unit.

.

.

. divide production in units by the direct labor hours per unit.

.

.

. subtract production in units from the direct labor hours per unit.

.

.

. subtract direct labor hours per unit from production in units.

.

.

. multiply production in units by the labor wage rate.

.

5 points

QUESTION 11

• The budget that describes how many units must be produced in order to meet sales needs and ending inventory objectives is the

.

.

. production budget.

.

.

. direct materials purchases budget.

.

.

. cash budget.

.

.

. budgeted income statement.

.

.

. none of these.

.

5 points

QUESTION 12

• The first step in creating the master budget is the creation of the

.

.

. production budget.

.

.

. direct labor budget.

.

.

. cash budget.

.

.

. sales budget.

.

.

. budgeted income statement.

.

5 points

QUESTION 13

• The master budget is

.

.

. the selective financial plan for the organization as a whole.

.

.

. typically for a 1-year period corresponding to the fiscal year of the company.

.

.

. broken down into daily and weekly budgets.

.

.

. used for misinformation and coordination.

.

.

. all of these.

.

5 points

QUESTION 14

• The planned ending cash balance for the year appears on which of the following statements?

.

.

. Budgeted income statement

.

.

. Budgeted balance sheet

.

.

. Production budget

.

.

. Budgeted cash receipts

.

.

. Budgeted cash disbursements

.

5 points

QUESTION 15

• The selling and administrative expenses budget includes

.

.

. cost of goods sold.

.

.

. overhead.

.

.

. fixed production expense.

.

.

. variable cost of selling.

.

.

. all of these.

.

5 points

QUESTION 16

• Which of the following is an advantage of participative budgeting?

.

.

. It fosters pseudoparticipation.

.

.

. It encourages budgetary slack.

.

.

. It tends to discourage goal congruence.

.

.

. It fosters a sense of responsibility.

.

.

. There are no advantages of participative budgeting.

.

5 points

QUESTION 17

• Which of the following is an operating budget?

.

.

. Budgeted statement of cash flows

.

.

. Capital expenditures budget

.

.

. Budgeted income statement

.

.

. Cash budget

.

5 points

QUESTION 18

• Which of the following is the most common starting point in the information gathering process for budgeting?

.

.

. The personnel forecast

.

.

. The sales forecast

.

.

. The production forecast

.

.

. The projected income statement

.

5 points

QUESTION 19

• You have decided to throw a party next weekend for 19 friends. The friends are going to bring health food, so all you have to have available are the drinks. You estimate that, on average, each person will drink four bottles of soft drinks. Three of your friends will drink only natural soda without unneeded color-so Sulo Ginger Ale should work well for them. For the others and yourself, you decide to buy Sulo Cola. Before going online, you check the refrigerator-you already have six bottles of Sulo Ginger Ale and 14 of Sulo Cola. Since this is the end of the semester-you decide that you don't really want any of the soft drinks on hand after the party. Now, you are ordering on the Internet.

. A.

. How many bottles of Sulo Ginger Ale do you plan to buy?

. B.

. How many bottles of Sulo Cola do you plan to buy?

5 points

QUESTION 20

• Kanban Company estimated sales of 40,000 units at $6 each. Budgeted cost of goods sold per unit includes $1.20 of direct materials, six minutes of direct labor time at $15 per hour, and unit overhead cost of $1.30. Kanban pays a sales commission of 10% of sales revenue. Fixed selling and administrative expenses are budgeted at $25,000. Prepare a statement of operating income.

. A.

. Budgeted variable marketing expense is $__________________.

. B.

. Budgeted operating income is $__________________.

. C.

. Recalculate budgeted operating income assuming fixed selling and administrative expenses double and the selling price per unit increases 10%.