All of the following budgets are prepared by merchandising companies except

	cost of goods sold, inventory and purchases.
	operating expense.
	direct materials.
	sales.

Question

7 of 25

Pro-Am Audio is a company contracted to DJ private events. Due to a recent increase in bookings, Pro-Am is considering the purchase of another mobile DJ unit. Pro-Am uses the payback method to evaluate its investments. The mobile DJ unit will cost $9,000, has a useful life of 12 years, and will generate $3,000 in net cash inflows per year. What is the payback period for the mobile DJ unit?

	3.00 years
	2.63 years
	2.20 years
	3.37 years

Question

8 of 25

Which of the following statements is not true?

	When a flexible budget is used in a performance report, it is prepared for the actual level of units sold.
	The volume variance for fixed cost will always be zero.
	The flexible budget variance for fixed costs will always be zero.
	The flexible budget variance is the comparison of actual results to the flexible budget.

Question

9 of 25

The Pasta Division of Whole Grain Corporation had sales of $6,500,000 and cost of sales of $2,535,000 last year. What is the Pasta Division's sales margin?

	61.00%
	78.00%
	5.23%
	32.00%

Question

10 of 25

Keegan Inc. budgeted 10,400 pounds of direct materials costing $18.50 per pound to make 5,200 units of product. The company actually purchased 11,400 pounds of direct materials costing $21.00 per pound to make the 5,200 units. What is the direct materials quantity variance?

	$21,000 unfavorable
	$18,500 unfavorable
	$21,000 favorable
	$18,500 favorable

Question

11 of 25

Tommy's Toys produces two types of toys: trains and dolls. Tommy's uses stainless steel to manufacture the trains and plastic to manufacture the dolls. Information regarding the usage of steel and plastic for the past year follows:

Product Names	Steel	Plastic
Direct materials information
Standard pounds per unit	2 lb.	1.0 lb.
Standard Price (SP) per pound	$3.00	?
Actual Quantity (AQ) used per unit	3.0 lb.	3.00 lb.
Actual Price (AP) paid for material	$1.75	$2.25
Actual Quantity Purchased (AQP) and used	2,800 lb.	800 lb.
Price variance	?	$1,200 F
Quantity variance	$900 U	?
Flexible budget variance	?	$412 F
Number of units produced	300	525

What is the direct materials flexible budget variance for steel used to manufacture the trains?

	$4,400 favorable
	$2,600 unfavorable
	$2,600 favorable
	$4,400 unfavorable