Multiple Choice (3 pts each) 1. For the month of November, the beginning inventory of Product M is expected to be 2,000 cases.  Expected sales are 10,000 cases, and the company wishes to begin the next period with an inventory of 1,000 cases.  The number of cases of M that the company must purchase during November is a. 11,000 cases. b. 10,000 cases. c. 9,000 cases. d. 13,000 cases. 2. XYZ Company projected unit credit sales for the last four months of the year as shown below: September   3,000 October    3,200 November   4,100 December                           5,600 The company’s past records show collection of credit sales as 60% in the month of sale and the balance in the following month.  If inventory units are sold for $25, the total cash collections in November will be a. $93,500. b. $37,400. c. $102,500. d. $61,500. 3. Strategic Budgets focus on a. short-range decisions. b. intermediate-range decisions. c. sales targets. d. long-range decisions/plans. 4. A sales budget has been prepared for April.  Management wants the amount of ending inventory each month to be equal to 10% of the next month’s cost of goods sold.   April cost of goods sold is projected at $80,000 and May cost of goods sold is projected at $60,000.  Ending inventory at the end of March is expected to be $8,000.  Based on this information, what would the amount of purchases be for April? a. $82,000 b. $86,000 c. $72,000 d. $78,000 5. When would a variance be labeled as favorable?  a. When standard costs are equal to actual costs b. When standard costs are less than actual costs c. When expected sales are greater than actual sales d. When actual costs are less than standard costs Use the following information to answer the next two questions: The following budget information is available for the XYZ Company for the first quarter of 2011: Sales ($16 per unit)                                  $320,000 Freight out                                               $.25 per unit sold Depreciation on Administrative Equipment $10,000 Sales & Admin. Salaries                          $40,000 +2% of sales Advertising                                              $12,000 Depreciation on Manufacturing Equipment       $15,000 Lease on Sales Building                        $45,000 Miscellaneous Selling Expenses            $5,000 All operating expenses are paid in cash in the month incurred. 6. If XYZ expects to sell 20,000 inventory units in the first quarter, what would be the amount of the total budgeted selling and administrative expenses for the first quarter of 2011? a. $123,400 b. $138,400 c. $113,400 d. $293,400 7. Based on first quarter sales of 20,000 units, the amount of XYZ’s expected cash outflow for selling and administrative expenses would be a. $123,400. b. $131,250. c. $113,400. d. $128,400. Use the following information to answer the next two questions:  National’s cost accountant prepared the following static budget b.

1. Multiple Choice (3 pts each)
1.
For the month of November, the beginning inventory of Product
M is expected to be 2,000 cases. Expected sales are 10,000
cases, and the company wishes to begin the next period with an
inventory of 1,000 cases. The number of cases of M that the
company must purchase during
November is
a.
11,000 cases.
b.
10,000 cases.
c.
9,000 cases.
d.
13,000 cases.
2.
XYZ Company projected unit credit sales for the last four
months of the year as shown below:
September 3,000 October 3,200 November 4,100
December 5,600
The company’s past records show collection of credit sales as
60% in the month of sale and the balance in the following

2. month. If inventory units are sold for $25, the total cash
collections in
November will be
a.
$93,500.
b.
$37,400.
c.
$102,500.
d.
$61,500.
3.
Strategic Budgets focus on
a.
short-range decisions.
b.
intermediate-range decisions.
c.
sales targets.
d.
long-range decisions/plans.
4.
A sales budget has been prepared for April. Management wants
the amount of ending inventory each month to be equal to 10%

3. of the next month’s cost of goods sold. April cost of goods
sold is projected at $80,000 and May cost of goods sold is
projected at $60,000. Ending inventory at the end of March is
expected to be $8,000. Based on this information, what would
the amount of purchases be for April? a. $82,000
b.
$86,000
c.
$72,000
d.
$78,000
5.
When would a variance be labeled as favorable?
a.
When standard costs are equal to actual costs
b.
When standard costs are less than actual costs
c.
When expected sales are greater than actual sales
d.
When actual costs are less than standard costs
Use the following information to answer the next two questions:
The following budget information is available for the XYZ
Company for the first quarter of 2011:

4. Sales ($16 per unit)
$320,000
Freight out
$.25 per unit sold
Depreciation on Administrative Equipment
$10,000
Sales & Admin. Salaries
$40,000 +2% of sales
Advertising
$12,000
Depreciation on Manufacturing Equipment $15,000
Lease on Sales Building $45,000
Miscellaneous Selling Expenses $5,000
All operating expenses are paid in cash in the month incurred.
6.
If XYZ expects to sell 20,000 inventory units in the first
quarter, what would be the amount of the total budgeted selling
and administrative expenses for the first quarter of 2011? a.
$123,400
b.
$138,400
c.
$113,400
d.

5. $293,400
7.
Based on first quarter sales of 20,000 units, the amount of
XYZ’s expected cash outflow for selling and administrative
expenses would be a. $123,400.
b.
$131,250.
c.
$113,400.
d.
$128,400.
Use the following information to answer the next two
questions:
National’s cost accountant prepared the following static budget
based on expected activity of 2,000 units for the 2011
accounting period:
Sales Revenue
$64,000
Variable Costs
(34,000)
Contribution Margin
30,000
Fixed Costs

6. (18,000)
Net Income
$12,000
8.
If National actually produced 1,800 units, the flexible budget
would show variable costs of a. $34,000.
b.
$22,666.
c.
$30,600.
d.
$25,500.
9.
If National actually produced 1,900 units, the flexible budget
would show fixed costs amounting to a. $19,800.
b.
$18,000.
c.
$52,000.
d.
none of the above.

7. Use the following information to answer the next two
questions:
Cox Manufacturing Company prepared the following static
budget income statement for 2011:
Sales Revenue
$125,000
Variable Costs
(75,000)
Contribution Margin
50,000
Fixed Cost
(30,000)
Net Income
$ 20,000
The budget was based on an expected sales volume of 5,000
units. Actual sales volume was 6,000 units.
10.
The amount of net income based on a flexible budget of 6,000
units is expected to be a. $24,000.
b.
$26,000.
c.
$30,000.
d.
$45,000.

8. 11.
The sales revenue volume variance is
a.
$25,000 favorable.
b.
$10,000 unfavorable.
c.
$4,000 unfavorable.
d.
$6,000 favorable.
12.
Marjorie Jewels, a maker of fashionable rings, produced and
sold 6,000 rings during the recent accounting period. The
company had expected to sell 5,600 rings. Because of
competition, the company priced the rings at $20 each, $2 lower
than the budgeted selling price. Based on this information,
there is
a.
a favorable $8,000 sales volume variance.
b.
an unfavorable $800 total sales variance.
c.
an unfavorable sales price variance.
d.

9. all of the above
13.
Which of the following is a difference between a static and a
flexible budget?
a.
Static budgets are based on single estimate of volume, whereas
flexible budgets show estimated costs and revenues at a variety
of activity levels.
b.
Static budgets are based on the same per unit variable amount,
whereas flexible budgets are based on multiple per unit variable
amounts.
c.
Static budgets use the same fixed cost amounts, whereas
flexible budgets change the amount of fixed costs at different
levels of activity.
d.
None of the other answers are correct.
14.
In which account is the cost of direct labor initially recorded?
a.
Wages Expense.
b.

10. Work in Process Inventory.
c.
Manufacturing Overhead.
d.
Cost of Goods Sold.
15.
JCK had beginning work in process inventory of $8,000.
During the period, JCK transferred $34,000 of raw materials to
work in process. Labor costs amounted to $41,000 and
overhead amounted to $36,000. If the ending balance in work
in process inventory was $12,000, what was the amount
transferred to finished goods inventory? a. $107,000.
b.
$119,000.
c.
$131,000.
d.
$111,000.
16.
The recognition of cash paid for wages of production workers
will
a.
decrease assets, equity, and net income.
b.

11. not affect assets and decrease net income.
c.
not affect assets, equity, or net income.
d.
decrease assets and increase net income.
17.
The cost of direct materials purchased on account is expensed
when
a.
the materials are purchased.
b.
the cash is paid to settle the associated accounts payable.
c.
the manufacturing process is complete.
d.
the goods made with the materials are sold.
18.
Product costs are expensed as cost of goods sold:
a.
When production is complete.
b.
At the start of production.
c.

12. When the related revenue is collected.
d.
When the related products are sold.
19.
The cost of indirect labor will initially be charged to:
a.
Cost of goods sold.
b.
Manufacturing overhead.
c.
Work in process.
d.
Wages expense.
20.
Product costs flow through the manufacturer's inventory
accounts in the following order: raw materials, work in process,
and finished goods. a. True
b. False
Extra Credit Problem (10 points):
Howe Company makes paint that it sells in 1-gallon containers
to retail home improvement stores. During 2012, the company
planned to make 190,000 gallons of paint. It actually produced
198,000 gallons. The standard and actual quantity and cost of
the color pigment for 1 gallon of paint follow.

13. Required
a.
Determine the total flexible budget materials variance for
pigment. Indicate whether the variance is favorable or
unfavorable.
b.
Determine the materials price variance and indicate whether the
variance is favorable (F) or unfavorable (U).
c.
Determine the materials usage variance and indicate whether the
variance is favorable (F) or unfavorable (U).
d.
Confirm your answers to Requirements
a
,
b
, and
c
by showing that the sum of the price and usage variances
equals the total variance.