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Introduction to Managerial Accounting - Disbursement

Introduction to Managerial Accounting
Review Questions

Chapter 7

1. Which of the following might be included as a disbursement on a cash budget?

A) A Above
B) B Above
C) C Above
D) D Above

2. Thirty percent of Sharp Company's sales are for cash and 70% are on account. Sixty percent of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following are budgeted sales data for the company:

Total cash receipts in April are expected to be:
A) $24,640
B) $35,200
C) $31,560
D) $33,640

3. On January 1, Colver Company has 6,500 units of Product A on hand. During the year, the company plans to sell 15,000 units of Product A, and plans to have 5,000 units on hand at year end. How many units of Product A must be produced during the year?
A) 13,500
B) 16,500
C) 15,000
D) 20,000

4. The selling and administrative expense budget of Ruffing Corporation is based on budgeted unit sales, which are 4,800 units for February. The variable selling and administrative expense is $8.10 per unit. The budgeted fixed selling and administrative expense is $71,520 per month, which includes depreciation of $16,800 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the February selling and administrative expense budget should be:
A) $38,880
B) $54,720
C) $110,400
D) $93,600

5. The basic idea behind responsibility accounting is that top management is responsible for preparing detailed budgets by which the performance of middle and lower management will be evaluated.

Chapter 8

6. Under traditional standard costing, which of the following would commonly be included when setting a standard quantity for direct material?

A) A above
B) B above
C) C above
D) D above

7. The following direct labor information pertains to the manufacture of product Glu:

What is the standard direct labor cost per unit of product Glu?
A) $30
B) $24
C) $15
D) $12

Use the following information to answer 8 - 10
Stench Foods Company uses a standard cost system to collect costs related to the production of its garlic flavored yogurt. The garlic (materials) standards for each container of yogurt produced are 0.8 ounces of crushed garlic at a standard cost of $2.30 per ounce.
During the month of June, Stench purchased 75,000 ounces of crushed garlic at a total cost of $171,000. Stench used 64,000 of these ounces to produce 71,500 containers of yogurt.

8. What is Stench's materials price variance for the month of June?
A) $1,500 favorable
B) $15,640 unfavorable
C) $17,250 favorable
D) $23,800 favorable

9. What is Stench's materials quantity variance for the month of June?
A) $1,500 favorable
B) $15,640 unfavorable
C) $17,250 favorable
D) $23,800 favorable

10. Assume that it takes 15 minutes of labor time to crush enough garlic to fill one container of yogurt. Because the smell of the garlic can be unbearable, workers are given (and they take it!) 10 minutes of break time every hour (i.e., 50 minutes of work, 10 minutes of break). How many minutes should Stench use as a standard quantity of labor time per container of yogurt?
A) 18.0
B) 16.2
C) 17.0
D) 17.5

Use the following information to answer 11 - 12
Holiday Chemical Company uses a standard cost system to collect costs related to the production of its "bowling ball" fruitcakes. The direct labor standard for each fruitcake is 1.25 hours at a standard cost of $11.00 per hour. During the month of November, Holiday's fruitcake production used 9,820 direct labor hours at a total direct labor cost of $106,547. This resulted in production of 8,500 fruitcakes for November.

11. What is Holiday's labor rate variance for November?
A) $8,855 favorable
B) $1,473 favorable
C) $13,047 unfavorable
D) $14,520 unfavorable

12. What is Holiday's labor efficiency variance for November?
A) $8,855 favorable
B) $10,328 favorable
C) $13,047 unfavorable
D) $14,520 unfavorable

Chapter 9

13. When using a flexible budget, what will occur to fixed costs as the activity level increases within the relevant range?
A) fixed costs per unit will decrease.
B) fixed costs per unit will remain unchanged.
C) fixed costs per unit will increase.
D) fixed costs are not considered in flexible budgeting.

14. A major disadvantage of static budgets is:
A) the difficulty in developing such budgets due to the high cost of gathering the necessary information.
B) the cost behavior pattern of manufacturing overhead, which is primarily fixed.
C) that the variances between actual and budget on a static budget result from comparing actual costs at one level of activity to budgeted costs at a different level of activity.
D) their length and complexity.

15. Comparing actual results to a budget based on actual activity for the period is possible with the use of a:
A) monthly budget.
B) master budget.
C) flexible budget.
D) rolling budget.

16. Last year, a department's standard costing system reported an unfavorable variable overhead spending variance and an unfavorable volume variance. The denominator activity level selected for allocating overhead to the product was based on 80% of capacity. If 100% of capacity had been selected instead as the denominator level, how would the reported unfavorable spending and volume variances be affected?

A) A above
B) B above
C) C above
D) D above

17. The overhead spending variance:
A) measures the variance in amount spent for fixed overhead items.
B) includes elements of waste or excessive usage as well as elements of price variance.
C) is generally considered to be the least useful of all overhead variances.
D) measures the difference between denominator activity and standard hours allowed.

18. If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a(n):
A) favorable efficiency variance.
B) favorable spending variance.
C) unfavorable efficiency variance.
D) unfavorable spending variance.

19. Variable overhead is applied on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:
A) favorable.
B) unfavorable.
C) zero.
D) indeterminable since it is not related to the labor efficiency variance.

20. Alex Company has a large underapplied overhead balance in the manufacturing overhead account. This could be explained by:
A) an unfavorable volume variance, assuming all other variances are zero.
B) a favorable volume variance, assuming all other variances are zero.
C) standard hours allowed for the period's output being greater than denominator hours for the period.
D) none of these.

Chapter 10

21. Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is:
A) Residual income can be computed without having to measure operating assets.
B) Managers are more likely to accept projects that are beneficial to the company.
C) ROI does not take into account both turnover and margin.
D) A minimum rate of return does not have to be specified when the residual income approach is used.

22. Which of the following performance measures will decrease if the minimum required rate of return increases?

A) A Above
B) B Above
C) C Above
D) D Above

23. Which of the following performance measures will increase if inventory decreases and all else remains the same?

A) A Above
B) B Above
C) C Above
D) D Above

24. Some investment opportunities which should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:
A) return on investment.
B) residual income.
C) contribution margin.
D) segment margin.

25. Given the following data:

The residual income would be:
A) $2,800
B) $0
C) $6,000
D) $8,000

See attached file for full problem description.

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Kao-wen Peng

ACCT 520 Introduction to Managerial Accounting
Review Questions

Chapter 7

1. Which of the following might be included as a disbursement on a cash budget?

A) A Above
B) B Above
C) C Above
D) D Above

Answer: D

2. Thirty percent of Sharp Company's sales are for cash and 70% are on account. Sixty percent of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following are budgeted sales data for the company:

Total cash receipts in April are expected to be:
A) $24,640
B) $35,200
C) $31,560
D) $33,640

Answer: D

Cash Collection 15,000 18,000 12,000 9,000
Credit Collection 21,000 25,200 16,800 12,600
25% following month 8,750 10,500 7,000
12% second month 4,200 5,040
Total 33,640

3. On January 1, Colver Company has 6,500 units of Product A on hand. During the year, the company plans to sell 15,000 units of Product A, and plans to have 5,000 units on hand at year end. How many units of Product A must be produced during the year?
A) 13,500
B) 16,500
C) 15,000
D) 20,000

Answer: B

Cost of Goods Manufactured = Beginning Inventory + Expected Sales - Ending Inventory
= 6,500 + 15,000 - 5,000
= 16,500

4. The selling and administrative expense budget of Ruffing Corporation is based on budgeted unit sales, which are 4,800 units for February. The variable selling and administrative expense is $8.10 per unit. The budgeted fixed selling and administrative expense is $71,520 per month, which includes depreciation of $16,800 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the February selling and administrative expense budget should be:
A) $38,880
B) $54,720
C) $110,400
D) $93,600

Answer: D

Variable selling and administrative expense = $8.10 x 4,800 units = $38,880
Fixed expense (cash outflows) = $71,520 - $16,800 = $54,720

5. The basic idea behind responsibility accounting is that top management is responsible for preparing detailed budgets by which the performance of middle and lower management will be evaluated.

(False)

Chapter ...

Solution Summary

This solution is comprised of a detailed explanation to answer various accounting review problems such as which of the following might be included as a disbursement on a cash budget.

$2.19