# 1. value: 2.00 points Which of the following factors is least likely to be considered in preparing a

1.
value:
2.00 points

Which of the following factors is least
likely to be considered in preparing a sales budget?
Plant capacity.
General economic and industry conditions.
Past sales volume.
The capital expenditures
budget.
Proposed selling expenses, such as

2.
value:
2.00 points

A sporting goods store purchased \$7,000 of
ski boots in October. The store had \$3,000 of ski boots in inventory at the
beginning of October, and expects to have \$2,000 of ski boots in inventory at
the end of October to cover part of anticipated November sales. What is the
budgeted cost of goods sold for October?
\$9,000.
\$8,000.
\$5,000.
\$10,000.
\$7,000.

3.
value:
2.00 points

Stritch Company is trying to decide how
many units of merchandise to order each month. The company’s policy is to have
20% of the next month’s sales in inventory at the end of each month. Projected
sales for August, September, and October are 30,000 units, 20,000 units, and
40,000 units, respectively. How many units must be purchased in September?
22,000.
24,000.
28,000.
14,000.
20,000.
4.
value:
2.00 points

Grafton sells a product for \$700. Unit
sales for May were 400 and a 3% growth in unit sales is forecasted for each
month. Grafton pays a sales manager a monthly salary of \$3,000 and a commission
of 2% of sales in dollars. Compute the projected selling expense to be reported
on the selling expense budget for the manager for month ended June 30.
\$11,652.
\$8,768.
\$5,768.
\$8,600.
\$8,652.
5.
value:
2.00 points

The sales budget for Carmel shows that
20,000 units of Product A and 22,000 units of Product B are going to be sold
for prices of \$10 and \$12, respectively. The desired ending inventory of
Product A is 20% higher than its beginning inventory of 2,000 units. The
beginning inventory of Product B is 2,500 units. The desired ending inventory
of B is 3,000 units. Budgeted purchases of Product B for the year would be:
16,500 units.
24,500 units.
20,500 units.
26,500 units.
22,500 units.

6.
value:
2.00 points

Which of the following statements about
budgeting is false?
Budgeting is
an aid to planning and control.
Budgeting
forces managers to think ahead and formalize long-range objectives.
Budgets help
coordinate the activities of the entire organization.
Budgets create
standards for performance evaluation.
The master budget should only be prepared by top management.

7.
value:
2.00 points

Grafton sells a product for \$700. Unit
sales for May were 400 and a 3% growth in unit sales is forecasted for each
month. Compute the total sales to be reported on the sales budget for month
ended June 30.
\$271,600.
\$297,000.
\$280,000.
\$288,400.
\$364,000.

The sales budget for Carmel shows that
20,000 units of Product A and 22,000 units of Product B are going to be sold
for prices of \$10 and \$12, respectively. The desired ending inventory of
Product A is 20% higher than its beginning inventory of 2,000 units. The
beginning inventory of Product B is 2,500 units. The desired ending inventory
of B is 3,000 units. Budgeted purchases of Product A for the year would be:
12,200 units.
22,400 units.
20,400 units.
20,000 units.
19,500 units.

A budget is best described as:
The minimum
acceptable performance level.
The most
crucial component of a company’s evaluation process.
A master
control device.
An informal
statement of company’s future plans usually expressed in monetary terms.
A formal statement of a company’s future plans usually
expressed in monetary terms.

Kent Company anticipates total sales for
April, May, and June of \$800,000, \$900,000, and \$950,000 respectively. Cash
sales are normally 25% of total sales. Of the credit sales, 30% are collected
in the same month as the sale, 65% are collected during the first month after
the sale, and the remaining 5% are not collected. Compute the amount of cash
received from credit sales for May.
\$652,500.
\$890,000.
\$561,500.
\$592,500.
\$817,500.

Kyle, Inc. has collected the following data
on one of its products. The direct materials price variance is:

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\$16,250
unfavorable.
\$33,000
favorable.
\$13,750
unfavorable.
\$30,000 unfavorable.
\$16,250
favorable.

A flexible budget performance report
compares the differences between:
Actual performance and standard costs at the budgeted sales
volume.
Actual
performance and budgeted performance based on budgeted sales volume.
Budgeted
performance over several periods.
Actual
performance over several periods.
Actual
performance and budgeted performance based on actual sales volume.

13.
value:
2.00 points

Bartels Corp. produces woodcarvings. It
takes 2 hours of direct labor to produce a carving. Bartels’ standard labor
cost is \$12 per hour. During August, Bartels produced 10,000 carvings and used
21,040 hours of direct labor at a total cost of \$250,376. What is Bartels’
labor rate variance for August?
\$4,160
favorable.
\$2,104 favorable.
\$2,000
unfavorable.
\$2,104
unfavorable.
\$2,000
favorable.

14.
value:
2.00 points

A company uses the following standard costs
to produce a single unit of output.

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During the latest month, the company purchased and used 58,000 pounds of direct
materials at a price of \$1.00 per pound to produce 10,000 units of output.
Direct labor costs for the month totaled \$56,350 based on 4,900 direct labor
hours worked. Variable manufacturing overhead costs incurred totaled \$15,000
and fixed manufacturing overhead incurred was \$10,400. Based on this
information, the direct labor efficiency variance for the month was:
\$3,650
favorable
\$1,200
unfavorable
\$2,450
unfavorable
\$1,200 favorable
\$2,450
favorable

15.
value:
2.00 points

Cabot Company collected the following data
regarding production of one of its products. Compute the direct materials
quantity variance.

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\$3,570
unfavorable.
\$3,570
favorable.
\$2,430
favorable.
\$6,000 unfavorable.
\$2,430
unfavorable.

16.
value:
2.00 points

The following information describes a
company’s usage of direct labor in a recent period. The direct labor rate
variance is:

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\$45,000
unfavorable.
\$28,000 favorable.
\$28,000
unfavorable.
\$45,000 favorable.
\$17,000
unfavorable.

17.
value:
2.00 points

The following information describes a
company’s usage of direct labor in a recent period. The direct labor efficiency
variance is:

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\$28,000 favorable.
\$17,000
unfavorable.
\$45,000
favorable.
\$28,000
unfavorable.
\$45,000
unfavorable.

18.
value:
2.00 points

Cabot Company collected the following data
regarding production of one of its products. Compute the direct materials cost
variance.

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\$2,430
favorable.
\$3,570 unfavorable.
\$6,000
unfavorable.
\$6,000
favorable.
\$3,570
favorable.

19.
value:
2.00 points

A job was budgeted to require 3 hours of
labor per unit at \$8.00 per hour. The job consisted of 8,000 units and was
completed in 22,000 hours at a total labor cost of \$198,000. What is the total
labor cost variance?
\$9,000 unfavorable.
\$2,000 unfavorable.
\$6,000 unfavorable.
\$8,000 unfavorable.
\$3,000 unfavorable.

20.
value:
2.00 points

A company provided the following direct
materials cost information. Compute the cost variance.

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\$80,750 Favorable
\$80,750 Unfavorable
\$78,250 Unfavorable
\$78,250 Favorable
\$2,500 Favorable

21.
value:
2.00 points

The following is a partially completed
lower section of a departmental expense allocation spreadsheet for Stoneham. It
reports the total amounts of direct and indirect expenses for the four
departments. Purchasing department expenses are allocated to the operating
departments on the basis of purchase orders. Maintenance department expenses are
allocated based on square footage. Compute the amount of Maintenance department
expense to be allocated to Fabrication.

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\$6,400.
\$8,100.
\$9,900.
\$9,000.
\$25,600.

22.
value:
2.00 points

Baker Corporation has two operating
departments, Machining and Assembly, and an office. The three categories of
office expenses are allocated to the two departments using different allocation
bases. The following information is available for the current period:

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The amount of the total office expenses that should be allocated to Assembly
for the current period is:
\$90,000.
\$54,250.
\$45,000.
\$35,750.
\$600,000.

23.
value:
2.00 points

Dresden, Inc. has four departments.
Information about these departments is listed below. If allocated maintenance
cost is based on floor space occupied by each, compute the amount of
maintenance cost allocated to the Cutting Department.

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\$3,724.
\$2,769.
\$3,000.
\$18,000.
\$6,000.

24.
value:
2.00 points

Abbe Company reported the following
financial numbers for one of its divisions for the year; average total assets
of \$4,100,000; sales of \$4,525,000; cost of goods sold of \$2,550,000; and
operating expenses of \$1,372,000. Compute the division’s return on assets:
14.7%.
30.3%.
23.6%.
13.3%.
10.4%.

25.
value:
2.00 points

The allocation bases for assigning indirect
costs include:
Only unit bases.
Any appropriate and
reasonable bases.
Only cost bases.
Only value bases.
Only physical bases.

Top of Form
26.
value:
2.00 points

For an investment center, the hurdle rate
is:
Not important to management.
The desired return on investments.
Not evaluated in determining the
performance of an investment center.
The cost of obtaining
financing.
The difference between the projected rate
and the earned rate.

27.
value:
2.00 points

The amount by which a department’s revenues
exceed its direct expenses is:
Net sales.
Gross profit.
Contribution
margin.
Departmental
profit.

28.
value:
2.00 points

Farber, Inc., has four departments. The Administrative
Department costs are allocated to the other three departments based on the
number of employees in each and the Maintenance Department costs are allocated
to the Assembly and Packaging Departments based on their occupied space. Data
for these departments follows:

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The total amount of the Administrative Department’s cost that would eventually
be allocated to the Packaging Department is:
\$4,800.
\$13,000.
\$12,000.
\$10,000.
\$18,000.

Time
remaining: 0:43:37
29.
value:
2.00 points

Mace Department store allocates its service
department expenses to its various operating (sales) departments. The following
data is available:

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The following information is available for its three operating (sales)
departments:

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What is the total expense allocated to Department B?
\$30,775.
\$30,500.
\$30,462.
\$32,160.
\$29,375.

30.
value:
2.00 points

The following is a partially completed
lower section of a departmental expense allocation spreadsheet for Stoneham. It
reports the total amounts of direct and indirect expenses for the four
departments. Purchasing department expenses are allocated to the operating
departments on the basis of purchase orders. Maintenance department expenses
are allocated based on square footage. Compute the amount of Maintenance
department expense to be allocated to Fabrication.

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\$9,900.
\$8,100.
\$25,600.
\$9,000.
\$6,400.

Marsden manufactures a cat food product
called Special Export. Marsden currently has 10,000 bags of Special Export on
hand. The variable production costs per bag are \$1.80 and total fixed costs are
\$10,000. The cat food can be sold as it is for \$9.00 per bag or be processed
further into Prime Cat Food and Feline Surprise at an additional \$2,000 cost.
The additional processing will yield 10,000 bags of Prime Cat Food and 3,000
bags of Feline Surprise, which can be sold for \$8 and \$6 per bag, respectively.
If Special Export is processed further into Prime Cat Food and Feline Surprise,
the total gross profit would be:
\$78,000.
\$100,000.
\$96,000.
\$68,000.
\$98,000.

32.
value:
2.00 points

The following present value factors are
provided for use in this problem.

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Norman Co. wants to purchase a machine for \$40,000, but needs to earn an 8%
return. The expected year-end net cash flows are \$12,000 in each of the first
three years, and \$16,000 in the fourth year. What is the machine’s net present
value (round to the nearest whole dollar)?
\$(28,240).
\$(9,075).
\$2,685.
\$42,685.
\$52,000.
Bottom of Form

Parker Plumbing has received a special
one-time order for 1,500 faucets (units) at \$5 per unit. Parker currently
produces and sells 7,500 units at \$6.00 each. This level represents 75% of its
capacity. Production costs for these units are \$4.50 per unit, which includes \$3.00
variable cost and \$1.50 fixed cost. To produce the special order, a new machine
needs to be purchased at a cost of \$1,000 with a zero salvage value. Management
expects no other changes in costs as a result of the additional production. If
Parker wishes to earn \$1,250 on the special order, the size of the order would
need to be:
300 units.
4,500 units.
625 units.
1,125 units.
2,250 units.

34.
value:
2.00 points

Eagle Company is considering the purchase
of an asset for \$100,000. It is expected to produce the following net cash
flows. The cash flows occur evenly throughout each year. Compute the payback
period for this investment. (Round to two decimal places.)

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2.85 years.
3.62 years.
2.57 years.
3.00 years.
2.50 years.

35.
value:
2.00 points

A machine costs \$180,000 and is expected to
yield an after-tax net income of \$10,800 each year. Management estimates the
machine will have a ten-year life, a \$20,000 salvage value, and straight-line
depreciation is used. Compute the accounting rate of return for the investment.
28.8%.
12.0%.
11.8%.
10.8%.
26.8%.

Saxon Manufacturing is considering
purchasing two machines. Each machine costs \$9,000 and will produce cash flows
as follows:

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Saxon Manufacturing uses the net present value method to make the decision, and
it requires a 15% annual return on its investments. The present value factors
of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which
machine should Saxon purchase?
Both machines are acceptable, but A should
be selected because it has the greater net present value.
Both machines are acceptable, but B should
be selected because it has the greater net present value.
Neither machine is acceptable.
Only Machine A is acceptable.
Only Machine B is
acceptable.

37.
value:
2.00 points

A company can buy a machine that is
expected to have a three-year life and a \$30,000 salvage value. The machine
will cost \$1,800,000 and is expected to produce a \$200,000 after-tax net income
to be received at the end of each year. If a table of present values of 1 at
12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for
three years, what is the net present value of the cash flows from the
investment, discounted at 12%?
\$118,855
\$705,391
\$629,788
\$583,676
\$1,918,855

38.
value:
2.00 points

A company is planning to purchase a machine
that will cost \$24,000, have a six-year life, and be depreciated over a
three-year period with no salvage value. The company expects to sell the
machine’s output of 3,000 units evenly throughout each year. A projected income
statement for each year of the asset’s life appears below. What is the payback
period for this machine?

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6 years.
12 years.
1 year.
4 years.
24 years.

Top of Form
39.
value:
2.00 points

Sherman Company can sell all of its
products A and Z that it can produce, but it has limited production capacity.
It can produce 6 units of A per hour or 10 units of Z per hour, and it has
20,000 production hours available. Contribution margin per unit is \$12 for A
and \$10 for Z. What is the most profitable sales mix for this company?
120,000 units of A and 0 units of Z.
0 units of A and 200,000
units of Z.
84,000 units of A and 60,000 units of Z.
60,000 units of A and 100,000 units of Z.
48,000 units of A and 80,000 units of Z.

40.
value:
2.00 points

Beyer Corporation is considering buying a
machine for \$25,000. Its estimated useful life is 5 years, with no salvage
value. Beyer anticipates annual net income after taxes of \$1,500 from the new
machine. What is the accounting rate of return assuming that Beyer uses
straight-line depreciation and that income is earned uniformly throughout each
year?
12.0%.
6.0%.
8.0%.
10.0%.
8.5%.
Bottom of Form