Managerial Accounting (WileyPlus Final Exam)

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Question-1

All of the following are correct statements about the cost-plus pricing approach except that it

is simple to calculate
considers customer demand
includes only variable costs in the cost base
will only work when the company sells the quantity it budgeted

Question-2

In the cost-plus pricing approach, the desired ROI per unit is calculated by multiplying the ROI percentage by

fixed costs
total assets
total costs
variable costs

Question-3

The first step in the absorption-cost approach is to calculate the

desired ROI per unit
markup percentage
target selling price
unit manufacturing cost

Question-4

Basing the cost-plus formula on only ______________ could encourage managers to set too low a price in order to boost sales.

fixed costs
transfer prices
variable costs
time-and-material prices

Question-5

A budget

can be a means of communicating a company’s objectives to external parties
facilitates coordination of activities within the business but is a poor tool for evaluating performance
is more beneficial if accepted by lower level management
represents management’s performance in financial terms

Question-6

What is “budgetary slack”?

It is the tolerance that is built into budgets to recognize that actual results will not match budgeted projections exactly
It is the process where managers intentionally underestimate budgeted revenues or overestimate budgeted expenses in order to make it easier to achieve budgetary goals
It is the amount that actual results vary from budgeted projections as reported at the end of the budget period
It is the process where upper management underestimates budgeted revenues or overestimates budgeted expenses in order to motivate lower management.

Question-7

At January 1, 2020, Barry, Inc. has beginning inventory of 5000 widgets. Barry estimates it will sell 40000 units during the first quarter of 2020 with a 5% increase in sales each quarter. Barry’s policy is to maintain an ending inventory equal to 10% of the next quarter’s sales. Each widget costs $2 and is sold for $3. How much is budgeted sales revenue for the third quarter of 2020?

$44100
$120000
$132300
$145200

Question-8

Lewis Hats is planning to sell 650 straw hats in April. Each hat requires ½ kilogram of straw and ¼ hour of direct labour. Straw costs $0.20 per kilogram and employees of the company are paid $22 per hour. Lewis has 80 kilograms of straw and 40 hats in beginning inventory and wants to have 50 kilograms of straw and 60 hats in ending inventory. How many units should Lewis Hats produce in April?

Question-9

Which one of the following is the end-product of the operating budgets?

the budgeted balance sheet
the budgeted income statement
the capital expenditure budget
the cash budget

Question-10

Yellow Card Company compared its actual sales results with a static budget. Which of the following situations might result?

favourable differences that are not justified
unfavourable differences that are not justified
either favourable or unfavourable differences that are not justified
actual differences that are justified

Question-11

EKPN Company prepared the following data in its static budget based on 150000 machine hours:

Direct Materials	$450,000
Direct Labour	225000
Variable Overhead	1125000
Fixed Overhead	2100000

Actual Results:
Machine Hours	160000 hours
Direct Materials	$475,000
Direct Labour	245000
Variable Overhead	1150000
Fixed Overhead	2110000

What is the budgeted Fixed Overhead at the actual level of activity?

$2100000
$2110000
$2340000
$3260000

Question-12

Responsibility centres in a decentralized organization

do not include cost centres
do not include profit centres
only include investment centres
include cost, profit, and investment centres

Question-13

The controller for Hemingway Inc. created a budget prior to the current period. At the end of the period, the controller compared the budget with the actual results. For what purpose is the controller using budgets?

Coordination
Control
Variances
Planning

Question-14

Why does management not investigate all budget versus actual differences?

Management would have to review every account
Management would have to investigate all differences regardless of size
Management would be using valuable resources to investigate minor variances
All of the above

Question-15

Which of the following is true?

In developing a standard cost for direct materials, a price factor and a quantity factor must be considered
A direct labour price standard is frequently called the direct labour efficiency standard
The standard predetermined overhead rate must be based on direct labour hours as the standard activity index
The direct materials price standard should be based on the production department’s best estimate of the cost of raw material

Question-16

Which of the following statements about standard costs is FALSE?

Properly set standards should promote efficiency
Standard costs facilitate management planning
Standards should not be used in “management by exception
Standard costs can simplify the costing of inventories.

Question-17

If actual direct material costs are greater than standard direct materials costs, it means that

actual costs were calculated incorrectly
the actual unit price of direct materials was greater than the standard unit price of direct materials
the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected
the purchasing agent or the production foreman is inefficient.

Question-18

What does a standard cost measure in managerial accounting?

Standards imposed by government
Standards imposed by the Employment Act and Ontario Human Rights Code
Standards to manage employee absenteeism
Standards are predetermined unit costs used as a measure of performance.

Question-19

The balanced scorecard measures

financial measures against internal measures
past outcomes against forward-looking measures
hard objective measures against financial measures
short-term objectives against soft subjective measures

Question-20

In calculating manufacturing overhead variances, the production volume variance relates:

only to fixed overhead costs
only to variable overhead costs
to all budgeted manufacturing overhead costs
to all actual manufacturing overhead costs

Question-21

In most cases, prices are set by the

customers
competitive market
largest competitor
selling company

Question-22

In time-and-material pricing, a material loading charge covers all of the following except

purchasing costs
related overhead
desired profit margin
all of these are covered

Question-23

Which one of the following is correct concerning a budget period?

A budget is prepared to summarize the organization’s activity for the month, quarter, or year just completed
A budget can be prepared for any period of time
A budget must be prepared for a one year period
A budget can be prepared for any period of time, but once that period has been adopted it cannot be changed

Question-24

During December, the capital budget indicates a $280000 purchase of equipment for cash. The ending November cash balance is budgeted to be $40000. Cash receipts are $840000, and cash disbursements are $610000 during December. The company wants to maintain a minimum cash balance of $20000. What is the minimum cash loan that must be planned to be borrowed from the Bank during December?

$30000
$10000
$50000
$0

Question-25

The purpose of creating a flexible budget is to determine

how much of the difference between actual and budgeted profits was due to the different levels of activity
how much of the difference between actual and budgeted profits was due strictly to the difference between budgeted and actual variable costs
how much of the difference between actual and budgeted profits was due strictly to the difference between budgeted and actual fixed costs
which department is responsible for the overall budget variance

Question-26

Match each of the following descriptions with one of the terms related to performance evaluation:

(a) The difference between total actual costs and total standard costs

(b) An efficient level of performance that is attainable under expected operating conditions

(c) An approach that uses financial and non-financial measures in an integrated system that links performance measurement and a company’s strategic goals

(d) A viewpoint used in the balanced scorecard to evaluate how well a company develops and retains its employees

(e) An evaluation tool that is not based on dollars

(f) A viewpoint used in the balanced scorecard to evaluate the company from the perspective of those people who buy and use its products or services

(g) An optimum level of performance under perfect operating conditions

(h) A viewpoint used in the balanced scorecard to evaluate the efficiency and effectiveness of the company’s value chain

Question-27

Mercuri Company has gathered the following information:

Variable manufacturing overhead costs	$12,960
Fixed manufacturing overhead costs	$9,990
Normal production level in labour hours	9,000
Standard labour hours	9,300

During the year, 3,500 units were produced, 10,200 hours were worked, and the actual manufacturing overhead was $23,500. Actual fixed overhead totalled $10,000. Mercuri applies overhead based on direct labour hours.

Calculate the total, fixed, and variable predetermined overhead rates.
Calculate the fixed manufacturing overhead volume variance.
Calculate the fixed overhead spending variance.
Calculate the variable overhead price variance.
Calculate the variable overhead quantity variance
Calculate total manufacturing overhead variance.

Question-28

Pargo Company budgeted selling expenses of $30,000 in January, $35,000 in February, and $40,000 in March. Actual selling expenses were $31,200 in January, $34,525 in February, and $46,000 in March.

Prepare a selling expense report that compares budgeted and actual amounts by month and for the year to date.

Question-29

Kitchen Care Inc. (KCI) is a manufacturer of toaster ovens. To improve control over operations, the president of KCI wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for KCI’s expected costs at production levels of 90,000, 100,000, and 110,000 units:

Variable Costs:
Manufacturing	$6/unit
Administrative	$3/unit
Selling	$1/unit
Fixed Costs:
Manufacturing	$150,000
Administrative	$80,000

Prepare a flexible budget for each of the possible production levels: 90,000, 100,000, and 110,000 units.

Question-30

Danner Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first 2 quarters of 2011.

1. Sales: Quarter 1, 28,000 bags; quarter 2, 42,000 bags. Selling price is $60 per bag.

2. Direct materials: Each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of Tarr at $1.50 per pound.

3. Desired inventory levels:

Type of Inventory	1-Jan	1-Apr	1-Jul
Snare (bags)	8,000	12,000	18,000
Gumm (pounds)	9,000	10,000	13,000
Tarr (pounds)	14,000	20,000	25,000

4. Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $14 per hour.

5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter.

6. Income taxes are expected to be 30% of income from operations.

Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected costs to be 150% of direct labor cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 1 and $421,500 in quarter 2.

Complete the budgeted income statement for the first 6 months and all required supporting budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget).

Question-31

The controller of Harrington Company estimates sales and production for the first four months of 2020 as follows:

Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 4 kg of direct materials to produce a finished unit, and direct materials cost $5 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase and 60% the following month. Ending direct materials inventory for each month is 40% of the next month’s production needs.

January’s beginning materials inventory is 1,080 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.

Answer the following questions:

(a) What are the total cash sales for the January-March quarter?

(b) What is the accounts receivable balance at the end of March?

(d) What are material purchases costs for February?

(e) What are cash payments on account for February?

(f) What is the ending balance in accounts payable for March?

(g) What is the cash balance for the period January-March?

Question-32

Lafleur Corporation needs to set a target price for its newly designed product, M14-M16. The following data relate to it:

	Per Unit	Total
Direct materials	$12
Direct labour	18
Variable manufacturing overhead	10
Fixed manufacturing overhead		$3,000,000
Variable selling and administrative expenses	7
Fixed selling and administrative expenses		2,000,000

These costs are based on a budgeted volume of 250,000 units produced and sold each year. Lafleur uses cost-plus pricing to set its target selling price. The markup on the total unit cost is 20%.

Calculate the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14- M16.
Calculate the desired markup per unit for M14-M16.
Calculate the target selling price for M14-M16.
Assuming that 200,000 M14-M16s are produced during the year, calculate the variable cost per unit, fixed cost per unit, and total cost per unit.

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