All of the following budgets that comprise a master budget follow the accrual basis of accounting rather than the cash basis except:

1 Capital expenditures budget.

2 Sales budget.

3 Direct materials purchases budget.

4 Operating expenses budget.

5 Manufacturing overhead budget.

Gatsby's decision to purchase a specialized piece of equipment to manufacture the new product line of child chairs will be reflected in the:

1Capital expenditures budget.

2Direct materials purchases budget.

3Cash budget.

4Manufacturing overhead budget.

5None of the above.

Gatsby pays its accounts payable within 30 days, and all of its customers pay in full for their orders when received. All of the following statements are true given this cash flow pattern except:

1Gatsby will not find it difficult to complete a cash budget.

2Estimating the monthly pattern of collections on accounts receivable is critical.

3Gatsby has sufficient cash on hand to make payroll payments to employees.

4Gatsby's purchasing agent will not likely be persuaded by special financing arrangements offered by raw material suppliers.

5Gatsby's customers would like to be rewarded for timely payment of sales invoices.

If Gatsby had an unusual turnover of sewing employees without adequate time to train replacement staff, then at the end of the year the company is likely to have a(n):

1Unfavorable direct labor efficiency variance.

2Favorable variable overhead rate variance.

3Unfavorable direct materials quantity variance.

4Unfavorable fixed overhead volume variance.

5Favorable direct labor rate variance.

Gatsby is evaluating whether it may have a skilled labor constraint; that is, not enough skilled labor to handle all of the production for two product lines. All of the following are considerations of the product mix to be produced except?

1Which products offer the highest contribution margin per unit of the constraint?

2Does a skilled labor constraint affect the amount of units of each product line that can be sold to the same degree?

3Which product has the most sunk investment costs?

4Would emphasizing one product over another affect fixed costs?

5Will the product mix ratio remain the same?

If Gatsby ends up with a favorable fixed overhead volume variance at the end of 2020, then:

1A greater volume of its products was produced than was expected.

2The cost of fixed overhead costs, such as depreciation of the building, was higher than expected.

3The number of direct labor hours used was less than the amount expected for the actual quantity of products made.

4Fewer yards of denim were required than expected for the actual number of products produced.

5Variable manufacturing overhead costs were more than the amount expected.