Conpetual 1
Which budget details the expected cost of hourly employees who assemble a company’s products?
a) Production budget
b) Direct labor budget
c) Selling expense budget
d) Factory overhead budget
b) Direct labor budget
What is a flexible budget?
a. A budget that remains unchanged regardless of output
b. A budget used only in emergencies
c. A budget adjusted for actual activity levels
d. A budget based on historical data
c) A budget adjusted for actual activity levels
Each unit requires 4 pounds of material. The company plans to produce 500 units. How many pounds of material are needed?
a. 1,000 pounds
b. 2,000 pounds
c. 4,000 pounds
d. 250 pounds
b. 2,000 pounds
Which budget is typically prepared first in the master budgeting process?
a. Production budget
b. Cash budget
c. Sales budget
d. Direct labor budget
c) Sales Budget
What is a spending variance?
a. The difference between actual cost and static budget cost
b. The difference between standard cost and budgeted cost
c. The difference between actual cost and flexible budget cost
d. The difference between budgeted sales and actual sales
c) The difference between actual cost and flexible budget cost
If desired ending inventory is 1,000 units, beginning inventory is 600 units, and sales are projected to be 4,000 units, how many units should be produced?
a. 3,000
b. 4,400
c. 4,000
d. 4,400
b. 4,400
(Sales + Ending Inv. – Beginning Inv. = 4,000 + 1,000 – 600)
Which of the following budgets determines how many units should be produced?
a. Sales budget
b. Production budget
c. Cash budget
d. Direct labor budget
b) Production Budget
Responsibility accounting helps ensure that managers are held responsible for…
a) fulfilling all demands made of the CFO
b) only items that the manager can actually control to a significant extent
c) the actions of their direct reports taken outside of working hours
d) the revenues and expenses of other departments
b) only items that the manager can actually control to a significant extent
A company plans to produce 1,200 units. Each unit requires 2 hours of direct labor. The labor rate is $10 per hour. What is the total direct labor cost?
a. $2,400
b. $12,000
c. $24,000
d. $1,200
c. $24,000
(1,200 units × 2 hours × $10 = $24,000)
The inventory level a company budgets to finish a month with to have available at the start of the next month is called what?
a) Extra inventory
b) Safety inventory
c) Bonus stock
d) Safety stock
d) Safety stock
Why is a flexible budget more useful than a planning budget for performance evaluation?
a. It is easier to prepare
b. It shows what costs should have been at the actual level of activity
c. It guarantees accurate forecasts
d. It shows what costs are estimated at the actual level of activity
b) It shows what costs should have been at the actual level of activity
Budgeted sales for May are 4,000 units. Each unit sells for $15. 70% of sales are collected in the month of sale, and the rest are collected next month. How much cash will be collected in May from May sales?
a. $60,000
b. $42,000
c. $18,000
d. $15,000
b. $42,000
(4,000 units × $15 = $60,000; 70% of $60,000 = $42,000)
Which budget details the expected cost of employee commissions?
a) Production budget
b) Direct labor budget
c) Selling expense budget
d) Factory overhead budget
C) Selling Expense Budget
The manager of the accounting department at a regional hospital is responsible for controlling departmental costs but does not generate revenue or make investment decisions. This department would be classified as a…
a) Cost center
b) Profit center
c) Investment center
d) Wellness center
a) Cost Center
A company has variable overhead of $4 per direct labor hour. Fixed overhead is $12,000 per month. If 2,500 labor hours are planned, what is the total manufacturing overhead?
a. $10,000
b. $22,000
c. $14,000
d. $12,000
b. $22,000
(2,500 × $4 = $10,000 + $12,000 fixed = $22,000)