Multiple Choice Answers

1. The following data have been taken from the budget reports of Brandon company, a merchandising company.

Purchases Sales
January$220,000$160,000
February$220,000$260,000
March$220,000$300,000
April$200,000$360,000
May$200,000$320,000
June$180,000$300,000
Fifty percent of purchases are paid for in cash at the time of purchase, and 25% are paid for in each of the next two months. Purchases for the previous November and December were $210,000 per month. Employee wages are 20% of sales for the month in which the sales occur. Selling and administrative expenses are 30% of the following month’s sales. (July sales are budgeted to be $280,000.) Interest payments of $22,000 are paid quarterly in January and April. Brandon’s cash disbursements for the month of April would be:
rev: 10_27_2011
$200,000
$315,000
$400,000
$260,000

2.
The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for $24 dollars and has a unit variable cost of $18. The company has budgeted the following data for November:

•Sales of $1,737,000, all in cash.
•A cash balance on November 1 of $44,000.
•Cash disbursements (other than interest) during November of $1,706,500.
•A minimum cash balance on November 30 of $130,000.

If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of $1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during November.

The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is:

$56,000
$147,000
$57,000
$148,000

3.
Sartain Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.
Beginning InventoryEnding Inventory
Finished goods (units)22,00072,000
Raw material (grams)52,00042,000
Each unit of finished goods requires 3 grams of raw material.
If the company plans to sell 570,000 units during the year, the number of units it would have to manufacture during the year would be:

570,000 units
518,000 units
620,000 units
642,000 units

 4.

Sartain Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.
Beginning InventoryEnding Inventory
Finished goods (units)28,00078,000
Raw material (grams)58,00048,000
Each unit of finished goods requires 3 grams of raw material.
If the company plans to sell 630,000 units during the year, how much of the raw material should the company purchase during the year?

2,088,000 grams
2,040,000 grams
2,058,000 grams
2,030,000 grams

5.

Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known.
True
False

6.
Which of the following is not a benefit of budgeting?
It uncovers potential bottlenecks.
It sets benchmarks for evaluation performance.
It reduces the need for tracking actual cost activity.
It formalizes a manager’s planning efforts.

7.

The standard cost per unit is computed by multiplying the standard quantity or hours by the standard price or rate.
True
False

8.

Ingrum Framing’s cost formula for its supplies cost is $1,200 per month plus $20 per frame. For the month of June, the company planned for activity of 618 frames, but the actual level of activity was 610 frames. The actual supplies cost for the month was $13,850. The spending variance for supplies cost in June would be closest to:

$290 U
$450 U
$450 F
$290 F

9.

Cadavieco Detailing’s cost formula for its materials and supplies is $1,950 per month plus $14 per vehicle. For the month of November, the company planned for activity of 90 vehicles, but the actual level of activity was 55 vehicles. The actual materials and supplies for the month was $2,490.
The materials and supplies in the planning budget for November would be closest to:
$3,210
$2,720
$4,801
$2,490

10.

Gourley Clinic uses client-visits as its measure of activity. During August, the clinic budgeted for 4,150 client-visits, but its actual level of activity was 4,080 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting:
Fixed element per monthVariable element per client-visit
Revenue—$40.90

Personnel expenses$36,900$12.10
Medical supplies2,9008.90
Occupancy expenses9,9002.90
Administrative expenses6,9000.2
Total expenses$56,600$24.10

The activity variance for administrative expenses in August would be closest to:
$74 F
$74 U
$14 U
$14 F

11.
Gourley Clinic uses client-visits as its measure of activity. During August, the clinic budgeted for 3,750 client-visits, but its actual level of activity was 3,700 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting:
Fixed element per monthVariable element per client-visit
Revenue—$40.10

Personnel expenses$36,100$11.30
Medical supplies2,1008.10
Occupancy expenses9,1002.10
Administrative expenses6,100.30
Total expenses$53,400$21.80

The activity variance for net operating income in August would be closest to:
$165 F
$915 U
$915 F
$165 U
12.

Diskind Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During October, the company budgeted for 6,800 units, but its actual level of activity was 6,750 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for October:
Data used in budgeting:
Fixed element
per monthVariable
element per tenant-day
Revenue—$34.30

Direct labor$0$6.30
Direct materials013.90
Manufacturing overhead38,0001.80
Selling and administrative expenses25,6000.30
Total expenses$63,600$22.30
Actual results for October:
Revenue$232,600
Direct labor$41,890
Direct materials$94,925
Manufacturing overhead$44,000
Selling and administrative expenses$30,480
The revenue variance in October would be closest to:
$640 F
$1,075 F
$640 U
$1,075 U

 

13.

Karmazyn Hospital bases its budgets on patient-visits. The hospital’s static budget for October appears below:
Budgeted number of patient-visits9,200
Budgeted variable costs:
Supplies (@ $9.30 per patient-visit)$ 85,560
Laundry (@ $9.00 per patient-visit)82,800
Total variable cost168,360
Budgeted fixed costs:
Wages and salaries99,720
Occupancy costs107,720
Total fixed cost207,440
Total cost$375,800
The total variable cost at the activity level of 9,300 patient-visits per month should be:
$207,440
$170,190
$168,360
$209,770
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14.

The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August:
•Actual cost of direct material purchased and used: $81,090
•Material price variance: $9,540 unfavorable
•Total materials variance: $21,840 unfavorable
•Standard cost per pound of material: $3
•Standard cost per direct labor-hour: $5
•Actual direct labor-hours: 11,250 hours
•Labor efficiency variance: $3,000 favorable
•Standard number of direct labor-hours per unit of Roff: 3 hours
•Total labor variance: $6,000 unfavorable
The actual material cost per pound was: (Round your final answer to 2 decimal places.)

$3.00
$5.60
$3.60
$3.40

15.

Niemiec Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below:
Hour
Move time3.4
Wait time18.5
Queue time12.4
Process time0.7
Inspection time1.0
The manufacturing cycle efficiency (MCE) was closest to: (Round your intermediate calculation and final answer to 2 decimal places.)

0.12
0.02
0.88
0.04

16.

Consider the following production and cost data for two products, X and Y:
Product XProduct Y
Contribution margin per unit$35$35
Machine-hours needed per unit7 hours 5 hours
The company has 14,900 machine hours available each period, and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?

$119,200
$89,400
$104,300
$89,880
17.

Gilde Industries is a division of a major corporation. Last year the division had total sales of $24,483,900, net operating income of $2,693,229, and average operating assets of $5,502,000. The company’s minimum required rate of return is 12%.
Required:
a.What is the division’s margin? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

b.What is the division’s turnover? (Round your answer to 2 decimal places.)

c.What is the division’s return on investment (ROI)? (Round you intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.)