financial accounting test

EXAM 3 PRACTICE (9, 10 & 11)

1.

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.

2. The financial budgets include the

a. cash budget and the selling and administrative expense budget. b. cash budget and the budgeted balance sheet.

c. budgeted balance sheet and the budgeted income statement. d. cash budget and the production budget.

3. Which of the following benefits could an organization reasonably expect from an effective

budget program?

a. Better control of the organization's costs.

b. Better coordination of an organization's activities. c. Better communication of the organization's objectives. d. All of the above. 4. The usual starting point for a master budget is:

a. the direct materials purchase budget. b. the budgeted income statement. c. the sales forecast or sales budget. d. the production budget.

5. If there were 70,000 pounds of raw materials on hand on January 1, 140,000 pounds are

desired for inventory at January 31, and 420,000 pounds are required for January production, how many pounds of raw materials should be purchased in January? a. 350,000 pounds b. 560,000 pounds c. 280,000 pounds d. 490,000 pounds

6.

7.

A company budgeted unit sales of 102,000 units for January, 2008 and 120,000 units for

February, 2008. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 30,600 units of inventory on hand on December 31, 2007, how many units should be produced in January, 2008 in order for the company to meet its goals?

a. 107,400 units b. 102,000 units c. 96,600 units d. 138,000 units

Farley Company reported the following information for 2008:

October November December Budgeted sales $230,000 $220,000 $270,000 Budgeted purchases $120,000 $128,000 $144,000 ? All sales are on credit.

? Customer amounts on account are collected 50% in the month of sale and 50% in the

following month.

? Cost of goods sold is 35% of sales.

? Farley purchases and pays for merchandise 60% in the month of acquisition and 40% in

the following month.

? Accounts payable is used only for inventory acquisitions. How much cash will Farley receive during November? a. $110,000 b. $245,000 c. $225,000 d. $220,000

8.

Farley Company reported the following information for 2008:

Budgeted sales

Budgeted purchases

October $230,000 $120,000

November $220,000 $128,000

December $270,000 $144,000

? Cost of goods sold is 35% of sales.

? Farley purchases and pays for merchandise 60% in the month of acquisition and 40% in

the following month.

? Accounts payable is used only for inventory acquisitions.

How much is the budgeted balance for Accounts Payable at October 31, 2008? a. $48,000 b. $72,000 c. $102,000 d. $51,200

9.

Farley Company reported the following information for 2008:

Budgeted purchases

October $120,000

November $128,000

December $144,000

? Operating expenses are: Salaries, $50,000; Depreciation, $20,000; Rent, $10,000; Utilities,

$14,000

? Operating expenses are paid during the month incurred. ? Accounts payable is used only for inventory acquisitions.

How much is the budgeted amount of cash to be paid for operating expenses in November? a. $202,000 b. $74,000 c. $94,000 d. $222,000

Which one of the following sections would not appear on a cash budget? a. Cash receipts b. Financing c. Investing

d. Cash disbursements

The variance that is most useful in assessing the performance of the purchasing department manager is:

a. the materials quantity variance. b. the materials price variance. c. the labor rate variance.

d. the labor efficiency variance.

The manufacturing overhead variance that is a measure of capacity utilization is: a. the overhead spending variance. b. the overhead efficiency variance. c. the overhead budget variance. d. the overhead volume variance.

Donkey Company expects direct materials cost of $6 per unit for 100,000 units (a total of $600,000 of direct materials costs). Donkey’s standard direct materials cost and budgeted direct materials cost is a. b. c. d.

Standard $6 per unit $6 per unit $600,000 per year $600,000 per year

Budgeted $600,000 per year

$6 per unit $6 per unit $600,000 per year

10.

11. 12. 13.

14.

Standard costs

a. may show past cost experience. b. help establish expected future costs.

c. are the budgeted cost per unit in the present. d. all of these.

The standard predetermined overhead rate used in setting the standard overhead cost is determined by dividing

a. budgetedoverhead costs by an expected standard activity index. b. actualoverhead costs by an expected standard activity index. c. budgetedoverhead costs by actual activity. d. actualoverhead costs by actual activity.

15.

ToolTime has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, ToolTime used 3,100 pounds of materials at a total cost of $12,090.

16. ToolTime’s materials price variance is

a. $90 U. b. $310 F. c. $400 F. d. $700 F.

ToolTime has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, ToolTime used 3,100 pounds of materials at a total cost of $12,090.

17. ToolTime’s materials quantity variance is

a. $90 F. b. $310 U. c. $400 U. d. $700 U.

ToolTime has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, ToolTime used 3,850 hours of labor at a total cost of $46,970.

18. ToolTime’s labor price variance is

a. $770 U. b. $800 U. c. $1,030 F. d. $1,930 F.