## (Solved) Assume the following information for two products, Hawaii Fantasy and Hawaii Joy.

Assume the following information for two products, Hawaii Fantasy and Hawaii Joy.

Hawaii Fantasy Hawaii Joy Sales mix 2 units 1 unit Selling price per unit \$15 \$100 Variable cost per unit \$10 \$40

Fixed expenses total \$490,000 per year. What is the breakeven point in units for each product?

A)7,000 units of Hawaii Fantasy and 14,000 units of Hawaii Joy B) 4,575 units of Hawaii Fantasy and 18,300 units of Hawaii Joy C) 18,300 units of Hawaii Fantasy and 4,575 units of Hawaii Joy D) 14,000 units of Hawaii Fantasy and 7,000 units of Hawaii Joy

6) Assume the following facts for two products, Zip and Zap:

Zip Zap Sales mix 3 units 1 unit Selling price per unit S21.00 \$28.00 \$14.00 \$16.00

If total fixed costs are \$132,000, the break-even point in units would be

A) 1,200 units of Zip and 400 units of Zap B) 4,000 units of Zip and 12,000 units of Zap C) 12,000 units of Zip and 4,000 units of Zap D) 8,400 units of Zip and 2,800 units of Zap

7) Which statement is FALSE?

A) If the sales-mix of products sold changes, the break-even point does not change. B) Each different sales-mix of products has a different break-even point. C) Changes in the sales-mix of products sold affects a company's net operating profit. D) Changes in the sales-mix of products sold affects a company's contribution margin.

8) Henricks Company has the following information available:

Revenue \$500,000

Variable production costs \$100,000

Fixed production costs \$100,000

Variable selling costs \$50,000

Fixed selling costs \$50,000

What is the gross margin and net income?

A) \$250,000; \$150,000 B) \$300,000; \$200,000 C) \$400,000: \$200,000 D) \$200,000; \$200,000

9) Assume the following facts:

Sales price \$180 per unit Variable cost \$100 per unit Total fixed costs \$39,600 Targeted net income \$52,800

How many units must be sold to achieve the targeted net income?

A) 1,155 B) 513 C)963 D) 629

10) Key Company has a targeted sales volume of 62,300 units. Total fixed costs are \$31,200. The

contribution margin per unit is \$1.20. What is targeted net income?

A) \$37,440 B) \$74,760 C) \$31,200 D) \$43,560

11) Merchandising and manufacturing companies account for in the same way.

A) selling expenses B) design expenses C) customer service expenses D) all of the above

12) A merchandising firm has inventory account(s). A manufacturing firm has

inventory account(s).

A) two; three B) three; one C) one; three D) three; three

13) Factory overhead does NOT include

A) electricity bill in factory B) insurance Expense on factory building C) wages of janitors incorporate headquarters D) supplies used in factory

14) Indirect production costs do NOT include

A) rent expense on factory building B) wages of forklift truck operators in assembly area C) wages of Security guards at corporate headquarters D) property taxes on factory building

15) In a manufacturing company, product costs used for external reporting include

A) indirect production costs only B) direct material costs plus nonproduction costs C) direct material costs plus direct labor cost only D) direct material costs plus direct labor cost plus indirect production costs

16) In a merchandising firm, the computation of Cost of Goods Sold does NOT use

A) Merchandise Inventory, ending balance B) Merchandise Inventory, beginning balance C) purchases of merchandise inventory D) purchases of raw materials

17) Which of the following costs is NOT an inventoriable cost for a manufacturing firm?

A) Marketing Expense B) Wages Expense for forklift operator in factory C) Wages Expense for security guard in factory D) Factory Supervisor's Salary Expense

18) Where does a company find forecasted financial statements for a five to ten year period?

A) strategic plan B) rolling budget C) long-range plan D) master budget

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19) A company identifies the following goals and objectives:

Increase sales 10 percent each year. Increase profits 5 percent each year. Increase total plant assets 5 percent each year.

Which of the following budgets identifies the overall goals and objectives of an organization?

A) strategic plan B) sales budget C) financial planning model D) master budget

20) A manager has several forecasts of sales corresponding to different levels of advertising. The

manager decides to implement \$1 million of advertising in the next fiscal year. At this level of

advertising, the manager uses the in the

A) sales goal; sales forecast B) sales forecast; sales budget C) sales budget; sales forecast D) sales forecast; sales goal

21) Important factors used to forecast sales for a company include all of the following items EXCEPT

A) layout of production equipment B) changes in product mix C) general economic conditions D) changes in firm's prices

22) Which of the following statements is FALSE about a strategic plan?

A) A strategic plan guides day-to-day operations. B) A strategic plan provides an overall framework for a long-range plan. C) A strategic plan does not deal with a specific time period. D) A strategic plan does not produce forecasted financial statements.

23) Which of the following budgets identifies the overall goals and objectives of the organization?

A) capital budget B) master budget C) cash budget D) strategic plan

24) The budget focuses on the budgeted income statement and the supporting schedules.

A) operating B) purchases and cost of goods sold C) financial D) operating expense

25) Which of the following is NOT a component of the operating budget?

A) capital budget B) budgeted income statement

C) operating expense budget D) sales budget

26) Which of the following is NOT a component of the operating budget?

A) capital budget B) budgeted income statement

C) operating expense budget D) purchases and cost of goods sold budget

27) The final output of the operating budget is

A) budgeted balance sheet B) budgeted statement of cash flows C) budgeted income statement D) budgeted statement of stockholders' equity

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28) Which budget is used to develop the schedule of cash disbursements for operating expenses? 28)

A) purchases and cost of goods sold budget B) cash budget C) operating expense budget D) cash disbursements budget

29) Rodney Company has the following sales budget: 29)

Month Cash Sales Credit Sales September \$100,000 \$250,000 October 125,000 180,000 November 130,000 210,000 December 135,000 190,000

Collections of credit sales are 50% in the month of sale, 40% in the month following sale, and 10% two months following sale. No uncollectible accounts are expected. What are the estimated cash collections in September from September sales?

A) \$250,000 B) \$200,000 C) \$225,000 D) \$100,000

30) Margaret Company has the following information: 30)

Month Budgeted Purchases January \$26,800 February 29,000 March 30,520 April 29,480 May 27,680

Purchases are paid as follows: 10% in the month of purchase 50% one month after purchase 40% two months after purchase

What is the expected balance in Accounts Payable on May 31?

A) \$36,704 B) \$2,948 C) \$24,912 D) \$11,792

31) To calculate the numbers in a flexible budget, managers use 31)

A) cost functions obtained from the high-low method B) flexible budget formulas C) cost functions developed from regression analysis D) all of the above

32) When should a company use an activity-based flexible budget with multiple cost drivers instead of

a simple flexible budget with one cost driver?

A) when a significant portion of costs vary with the number of units of sales B) when a significant portion of costs vary with cost drivers other than units of output C) when a significant portion of costs vary with only one cost driver D) when a significant portion of costs vary with the number of units of output

33) Huntsman Company's variable selling and administrative expenses are \$48,000 at a production level of 6,000 units. If the production level is 8,000 units, what are the variable selling administrative expenses?

A) \$64,000 B) \$56,000 C) \$80,000 áŽ ) \$48,000

34) Perez Company had the following information available:

Expected Costs and Selling Price Based on 5,000 Units:

Variable manufacturing costs per unit \$32 Fixed manufacturing costs per unit \$20 Selling price per unit \$70

Expected production level 5,000 units

In the flexible budget at 15,000 units, what is the total manufacturing cost?

A) \$580,000 B) \$680,000 C) \$480,000 D) \$780,000

35) Which of the following is used to develop flexible budgets?

A) cost functions B) fixed overhead variances

C) flexible budget variances D) static budget variances

36) A company that has an activity-based costing system with multiple cost drivers will prepare a(n)

budget. A) short-range planning B) activity-based flexible C) strategic D) financial planning

37) The activity-level variance for fixed costs equals zero when o

A) the actual level of output is less than the static budget level of output B) the actual level of output equals the static budget level of output C) the actual level of output is greater than the static budget level of output D) all of the above

38) Corrao Company had a static budgeted operating income of \$8.6 million. Actual operating income

was \$6.4 million. The flexible budget operating income at the actual level of output is \$7,000,000. What is the static-budget variance of operating income?

A) \$2.2 million Unfavorable B) \$2.2 million Favorable C) \$1.6 million Favorable D) \$1.6 million Unfavorable

39) For the current year, LeBombard Company's static budget sales were \$225,000. Actual sales for the current year were \$220,000. Actual sales last year were \$219,000. Expected sales last year were \$225,000. What is the static budget variance for sales in the current year?

A) \$5,000 Favorable B) \$6,000 Favorable C) \$6,000 Unfavorable D) \$5,000 Unfavorable

40) Differences between the actual results and the flexible budget at the actual level of output achieved

arE variances.

A) flexible budget B) operating budget C) static budget D) activity budget

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41) Conner Company has the following information:

Actual operating loss at 5,000 units \$(11,000) Budgeted operating income at 5,000 units \$5,000 Budgeted operating income at 10,000 units \$12,000 Planned level of operations 10,000 units Actual level of operations 5,000 units

Assume units of output are the cost driver for product costs. What is the static budget variance for

operating income?

A) \$23,000 Favorable B) \$12.000 Unfavorable C) \$11,000 Unfavorable D) \$23,000 Unfavorable

42) If the sales activity variance was \$8,000 Favorable and the static budget variance was \$10,000

Favorable, then the flexible budget variance was o

A) \$18,000 Unfavorable B) \$18,000 Favorable C) \$2,000 Unfavorable D) \$2,000 Favorable

43) One variance often influences another variance. If the direct materials price variance is favorable,

then it is possible that this variance will cause

A) the direct labor price variance to be favorable B) the direct labor price variance to be unfavorable C) the direct materials quantity variance to be favorable D) the direct materials quantity variance to be unfavorable

44) Which of the following statements about perfection standards is TRUE?

A) They usually result in unfavorable variances. B) It is generally believed that they have a negative influence on employee morale. C) They are expressions of the most efficient performance possible. D) All of the above

45) Variances should be investigated if they

A) are unfavorable B) exceed certain dollar amounts or percentage deviations from the budget C) are smaller than the variances in the prior period D) are favorable

46) When a firm meets a sales goal, it is said to be ... When a firm incurs more direct material

costs to manufacture products than expected, the firm is said to be o

A) effective; ineffective B) efficient; inefficient C) efficient; ineffective D) effective; inefficient

47) Barber Company produces 2,500 units. Each unit was expected to require 2 labor hours at a cost of

\$10 per hour. Total labor cost was \$52,250 for 4,750 hours worked. Direct labor is measured in labor

hours. What is the direct labor price variance?

A) \$2,500 Unfavorable B) \$2,500 Favorable C) \$4,750 Favorable D) \$4,750 Unfavorable

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48) The following information is for Brankov Corporation:

Direct Materials (measured in pounds)

Standard price per unit of input \$20 Actual price per unit of input \$18 Standard inputs per unit of output 3 pounds Actual units of input 8,300 pounds Actual units of output 2,770 units

What is the flexible budget variance for direct materials?

A) \$16,400 Unfavorable B) \$16,800 Unfavorable C) \$16,400 Favorable D) \$16,800 Favorable

49) At 60,000 machine hours, Norwall Company's static budget for variable overhead costs is \$180,000.

At 60,000 machine hours, the company's static budget for fixed overhead costs is \$300,000. Machine hours are the cost driver of all overhead costs. The static budget is based on 60,000 machine hours. At 60,000 machine hours, the company produces 40,000 units. The following data

is available:

Actual units produced and sold 42,000 Actual machine hours 64,000 Actual variable overhead costs \$185,600 Actual fixed overhead costs \$302,400

What is the variable overhead spending variance?

A) \$1,000 Unfavorable B) \$6,400 Unfavorable C) \$1,000 Favorable D) \$6,400 Favorable

50) The flexible budget variance for variable overhead costs is composed of a(n)

a(n) variance.

A) quantity, efficiency B) spending; rate C) spending; efficiency D) efficiency; effective

variance and

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