Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. The cash budget must be prepared before you can complete the
A. raw materials purchases budget.
B. production budget.
C. schedule of cash disbursements.
D. budgeted balance sheet.
Use the following information to answer this question.
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700
client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data
concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expenses $9,508
Administrative expenses $4,772
2. The activity variance for personnel expenses in January would be closest to
A. $261 F.
B. $661 U.
C. $661 F.
D. $261 U.
3. The company plans to sell 22,000 units of Product WZ in June. The finished-goods inventories on June
1 and June 30 are budgeted to be 100 and 400 units, respectively. The direct labor hours are 11,000 and
the direct labor rate is $10.50. Budgeted direct-labor costs for June would be
A. $462,000.
B. $234,150.
C. $455,700.
D. $117,075.
4. Which of the following will not result in an increase in return on investment (ROI), assuming other
factors remain the same?
A. A reduction in expenses
B. An increase in net operating income
C. An increase in sales
D. An increase in operating assets
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
5. The activity variance for personnel expenses in December would be closest to
A. $71 F.
B. $2,361 F.
C. $2,361 U.
D. $71 U.
6. There are various budgets within the master budget. One of these budgets is the production budget. Which of the following best describes the production budget?
A. It details the required direct-labor hours.
B. It’s calculated based on the sales budget and the desired ending inventory.
C. It details the required raw materials purchases.
D. It summarizes the costs of producing units for the budget period.
Use the following information to answer this question.
The Adams Company, a merchandising firm, has budgeted its activity for November according to the
following information:
• Sales were at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance on November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
7. The budgeted cash disbursements for November are
A. $345,000.
B. $405,000.
C. $375,000.
D. $530,000.
8. A company’s average operating assets are $220,000, and its net operating income is $44,000. The
company invested in a new project, increasing average assets to $250,000 and increasing its net operating
income to $49,550. What is the project’s residual income if the required rate of return is 20%?
A. ($450)
B. $600
C. ($600)
D. $450
9. The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3
hours of direct labor at a rate of $9.10 per direct-labor hour. LFM Company needs to prepare a direct-labor
budget for the second quarter of next year. The budgeted direct-labor cost per unit of Product T would be
A. $7.00.
B. $10.40.
C. $9.10.
D. $11.83.
Use the following information to answer this question.Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
10. The medical supplies in the flexible budget for December would be closest to
A. $17,472.
B. $17,378.
C. $18,105.
D. $18,150.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
11. The spending variance for medical supplies in December would be closest to
A. $725 F.
B. $725 U.
C. $680 U.
D. $680 F.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
12. The personnel expenses in the planning budget for December would be closest to
A. $53,370.
B. $53,299.
C. $51,009.
D. $51,147.
Use the following information to answer this question.
The Adams Company, a merchandising firm, has budgeted its activity for November according to the
following information:
• Sales were at $450,000, all for cash.• Merchandise inventory on October 31 was $200,000.
• The cash balance on November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
13. The budgeted net income for November is
A. $50,000.
B. $68,000.
C. $135,000.
D. $75,000.
14. The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of the
year. The budgeted variable factory overhead is $5.00 per direct-labor hour; the budgeted fixed factory
overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct-labor time
for December is 8,000 hours, then total budgeted factory overhead per direct-labor hour (rounded) is
A. $16.25.
B. $14.38.
C. $9.38.
D. $12.50.
15. Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating
assets of $84,000 at the beginning of the year and $90,000 at the end of the year. What was the company’s
turnover rounded to the nearest tenth?
A. 9.8
B. 9.5
C. 10.2
D. 9.2
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard
costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to
production on the basis of standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
16. The materials quantity variance for January is
A. $800 U.
B. $750 F.
C. $300 U.
D. $300 F.
17. The budget or schedule that provides necessary input data for the direct-labor budget is the
A. production budget.
B. raw materials purchases budget.
C. cash budget.
D. schedule of cash collections.
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard
costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to
production on the basis of standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
18. The labor rate variance for January is
A. $585 U.
B. $475 F.
C. $475 U.
D. $585 F.
Use the following information to answer this question.
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard
costs for one bag of Fastgro as follows:End of exam
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to
production on the basis of standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
19. The materials price variance for January is
A. $1,640 F.
B. $1,700 F.
C. $1,300 U.
D. $1,640 U.
20. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of
$50,000 for Division A and had a contribution margin ratio of 30% in Division B, when sales in Division B
were $200,000. Net operating income for the company was $25,000, and traceable fixed expenses were
$40,000. Lyons Company’s common fixed expenses were
A. $45,000.
B. $70,000.
C. $40,000.
D. $85,000.
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