15 Multiple Choice Questions Due in 1 hour. Accounting

1. Which of the following statements regarding budgets is true?

a. They rarely use estimates.

b. They should not be used for performance evaluations.

c. They should focus on past performance.

d. They will likely require the input of more than one manager.

2. Differences in sales revenue between the flexible budget and actual results can be attributed to:

a. the sales volume variance.

b. the flexible budget variance.

c. the sales price variance.

d. the variable overhead efficiency variance.

3. The usual starting point when developing a sales forecast is:

a. the production budget.

b. the cash budget.

c. last year's level of sales.

d. competitor budget information.

4. Last year, Garrison Manufacturing sold 250,000 units at $8 each. Both sales volume and sales price are expected to increase by 15 percent in the upcoming year. The expected sales revenue for the upcoming year is:

a. $2,645,000

b. $2,300,000

c. $2,000,000

d. $1,955,000

5. Which of the following statements regarding budgeting is false?

a. The focus of budgeting is planning.

b. Many companies use enterprise resource planning (ERP) systems as a budgeting tool.

c. Budgeting is a bookkeeping task.

d. Budgeting helps managers determine the resources needed to meet their goals and objectives.

6. Tulley Manufacturing has an unfavorable direct labor rate variance. Which of the following would be the most likely reason for this variance?

a. The company used lower-paid workers in the production process than they had expected.

b. Employees took a longer amount of time to produce the product than expected.

c. The company gave employees an unexpected raise due to union negotiations.

d. Employees used more direct materials in the production process than expected.

7. The alignment of the personal goals of the managers of an organization with the goals of the organization is called:

a. a bottleneck.

b. benchmarks.

c. goal congruence.

d. static budgeting.

8. Which of the following statements is true regarding the budgeted cost for direct materials?

a. It would be used on a static budget but not a flexible budget.

b. It would consist of two components – a standard quantity and a standard price.

c. It must be determined after materials are purchased for the year.

d. It can not be determined if a company uses a just-in-time inventory system.

9. Which of the following is an advantage of the budgeting process?

a. It requires very little input from various departmental managers, leaving them more time to devote to day-to-day activities.

b. It can define specific goals and objectives that may be used in evaluating future job performance.

c. It forces management to focus on the past and not be distracted by the day-to-day operations of the business.

d. It requires no communication between various managers in the organization.

10. Prevo Products Inc. has a $15,000 unfavorable flexible budget variance for July. Which of the following statements is true, if July's actual net operating income was $300,000?

a. Prevo's static budget must have showed a net operating income of $315,000.

b. Prevo's static budget must have showed a net operating income of $285,000.

c. Prevo's flexible budget must have showed a net operating income of $315,000.

d. Prevo's flexible budget must have showed a net operating income of $285,000.

11. Lukey Products has an unfavorable materials usage variance. Which of the following would be the most likely reason for this variance?

a. The company under budgeted the quantity of material to be used for each unit.

b. The company purchased material at a price for less than what was expected.

c. The company budgeted for a lower sales volume than what actually occurred.

d. The company did not use up all the material that had been purchased.

12. The flexible budget variance:

a. directs management's attention to specific reasons for why budgeted income differed from actual operating income.

b. compares the static budget to the flexible budget.

c. removes any differences between budgeted operating income and actual operating income that are attributable to differences in budgeted and actual volume.

d. is most often used to determine whether or not there is sufficient demand for a company's product.

13. Which of the following statements is true regarding "management by exception"?

a. It is rarely used in variance analysis.

b. It forces managers to investigate all variances, regardless of size.

c. It requires managers to investigate variances that are material in amount.

d. It requires managers to calculate standard costs but not actual costs.

14. In 2012, Wingen Inc. sold 325,000 units at $8 each. Sales volume is expected to increase by 15 percent in 2013 while the price of each unit is expected to decrease by 15 percent. The expected sales revenue for 2013 is:

a. $   373,750

b. $2,541,500

c. $1,878,500

d. $2,990,000

15. A budget built from the ground up each year rather than by simply adding a percentage increase to last year's numbers is called:

a. a static budget.

b. a flexible budget.

c. a zero-based budget.

d. a master budget.