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Exam 2 EAC 2212 Lamont Company uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is $64,000 variable and $180,000 fixed. If Lamont had actual overhead costs of $250, A $2,000 unfavorable B $2,000 favorable C $6,000 unfavorable D $8,000 favorable ANS. B The production budget shows that expected unit sales are 40,000. The total required units are 45,000. What are the required production units? A 5, B 7, C 10, D Cannot be determined from the data provided ANS. D Meyerhoff Company has the following budgeted sales: July $100,000, August $150,000, and September $125,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during September are A $140, B $132, C $131, D $125, ANS. B
The following information is taken from the production budget for the first quarter Beginning inventory in units
Sales budgeted for the quarter
Production capacity in units
How many finished goods units should be produced during the quarter if the company desires 1, units available to start the next quarter? A 229, B 227, C 237, D 229, ANS. A If a company has adopted continuous budgeting, the budget will show plans for A Every day B A full year ahead C The current year and the next year D At least five years ANS. B The starting point in preparing a master budget is the preparation of the A Production budget B Sales budget C Purchasing budget D Personnel budget ANS. B
Ashcroft Inc. prepared a 2010 budget for 60,000 units of product. Actual production in 2010 was 65,000 units. To be most useful, what amounts should a performance report for this company compare? A The actual results for 65,000 units with the original budget for 60,000 units B The actual results for 65,000 units with a new budget for 65,000 units C The actual results for 65,000 units with last year's actual results for 67,000 units D It doesn't matter. All of these choices are equally useful ANS. B A budget A Is a substitute for management B Is an aid to management C Can operate or enforce itself D Is the responsibility of the accounting department ANS.B The purpose of the departmental overhead cost report is to A Control indirect labor costs B Control selling expense C Determine the efficient use of materials D Control overhead costs ANS. D Nunley Company's direct materials budget shows total cost of direct materials purchases for April $200,000; May $240,000; and June $280,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for June are A $264, B $256, C $240, D $208, ANS. A
A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs A flexible budget prepared at the 90,000 machine hours level of activity would show total A $202, B $270, C $277, D $225, ANS. C A common starting point in the budgeting process is A Expected future net income B Past performance C To motivate the sales force D A clean slate, with no expectations ANS. B DeVito Exports Inc. budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2010, to June 30, 2011. June 30, 2011 June 30, 2010 Raw Materials 3,000 kilos 2,000 kilos Three kilos of raw materials are needed to produce each unit of finished product. If DeVito Exports plans to produce 280,000 units during the 2010–2011 fiscal year, how many kilos of materials will the company need to purchase for its production during the year? A 841, B 843, C 840, D 839, ANS. A
The direct materials budget shows Units to be produced 3, Total pounds needed for production
Total materials required 13, What are the direct materials per unit? A .44 pounds B 4.0 pounds C 4.4 pounds D Cannot be determined from the data provided ANS. B A static budget is appropriate for A Variable overhead costs B Direct materials costs C Fixed overhead costs D None of these ANS. C Pine Company produced 128,000 units in 60,000 direct labor hours. Production for the period was estimated at 132,000 units and 66,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at A 64,000 hours and 66,000 hours B 66,000 hours and 60,000 hours C 64,000 hours and 60,000 hours D 60,000 hours and 60,000 hours ANS. D
Davies Nursery plans to sell 160 potted plants during April and 120 units in May. Davies Nursery keeps 15% of the next month’s sales as ending inventory. How many units should Davies Nursery produce during April? A 154 B 166 C 160 D 178 ANS. A Top management's reaction to a difference between budgeted and actual sales often depends on A Whether the difference is favorable or unfavorable B Whether management anticipated the difference C The materiality of the difference D The personality of the top managers ANS. C The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called A Static reporting B Flexible accounting C Responsibility accounting D Master budgeting ANS. C The per-unit standards for direct labor are 1.5 direct labor hours at $12 per hour. If in producing 2, units, the actual direct labor cost was $36,800 for 3,000 direct labor hours worked, the total direct labor variance is A $1,920 unfavorable B $6,400 favorable C $4,000 unfavorable D $6,400 unfavorable ANS. B
What is a standard cost? A The total number of units times the budgeted amount expected B Any amount that appears on a budget C The total amount that appears on the budget for product costs D The amount management thinks should be incurred to produce a good or service ANS. D The difference between a budget and a standard is that A A budget expresses what costs were, while a standard expresses what costs should be B A budget expresses management's plans, while a standard reflects what actually happened C A budget expresses a total amount, while a standard expresses a unit amount D Standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system ANS. C Which of the following is not considered an advantage of using standard costs? A Standard costs can reduce clerical costs B Standard costs can be useful in setting prices for finished goods C Standard costs can be used as a means of finding fault with performance D Standard costs can ANS. C The formula for the materials quantity variance is A (SQ × AP) – (SQ × SP) B (AQ × AP) – (AQ × SP) C (AQ × SP) – (SQ × SP) D (AQ × AP) – (SQ × SP) ANS. C
