Question;MULTIPLE CHOICE QUESTIONS;38. What is budgetary;control?;a. Another;name for a flexible budget;b. The;degree to which the CFO controls the budget;c. The;use of budgets in controlling operations;d. The;process of providing information on budget differences to lower;level managers;39. A major element in budgetary control is;a. the preparation of long-term plans.;b. the comparison of actual results with planned;objectives.;c. the valuation of inventories.;d. approval of the budget by the stockholders.;40. Budget reports should be prepared;a. daily.;b. monthly.;c. weekly.;d. as frequently as needed.;41. On the basis of the budget reports;a. management analyzes differences between;actual and planned results.;b. management may take corrective action.;c. management may modify the future plans.;d. All of these.;42. The purpose of the departmental overhead;cost report is to;a. control indirect labor costs.;b. control selling expense.;c. determine the efficient use of materials.;d. control overhead costs.;43. The purpose of the sales budget report is;to;a. control selling expenses.;b. determine whether income objectives are being;met.;c. determine whether sales goals are being met.;d. control sales commissions.;44. The comparison of differences between;actual and planned results;a. is done by the external auditors.;b. appears on the company's external financial;statements.;c. is usually done orally in departmental;meetings.;d. appears on periodic budget reports.;45. A static budget;a. should not be prepared in a company.;b. is useful in evaluating a manager's;performance by comparing actual variable costs and planned variable costs.;c. shows planned results at the original;budgeted activity level.;d. is changed only if the actual level of;activity is different than originally budgeted.;46. A static budget report;a. shows costs at only 2 or 3 different levels;of activity.;b. is appropriate in evaluating a manager's;effectiveness in controlling variable costs.;c. should be used when the actual level of;activity is materially different from the master budget activity level.;d. may be appropriate in evaluating a manager's;effectiveness in controlling costs when the behavior of the costs in response;to changes in activity is fixed.;47. A static budget is appropriate in;evaluating a manager's performance if;a. actual activity closely approximates the;master budget activity.;b. actual activity is less than the master;budget activity.;c. the company prepares reports on an annual;basis.;d. the company is a not-for-profit organization.;48. When budgeted and actual results are not;the same amount, there is a budget;a. error.;b. difference.;c. anomaly.;d. by-product.;49. Top management's;reaction to a difference between budgeted and actual sales often depends on;a. whether the difference is favorable or;unfavorable.;b. whether management anticipated the;difference.;c. the materiality of the difference.;d. the personality of the top managers.;50. If costs are not;responsive to changes in activity level, then these costs can be best described;as;a. mixed.;b. flexible.;c. variable.;d. fixed.;51. Assume that actual sales results exceed the;planned results for the second quarter. This favorable difference is greater;than the unfavorable difference reported for the first quarter sales. Which of;the following statements about the sales budget report on June 30 is true?;a. The year-to-date results will show a;favorable difference.;b. The year-to-date results will show an;unfavorable difference.;c. The difference for the first quarter can be;ignored.;d. The sales report is not useful if it shows a;favorable and unfavorable difference for the two quarters.;52. A static budget is appropriate for;a. variable overhead costs.;b. direct materials costs.;c. fixed overhead costs.;d. None of these.;53. What is the primary;difference between a static budget and a flexible budget?;a. The;static budget contains only fixed costs, while the flexible budget;contains only variable costs.;b. The;static budget is prepared for a single level of activity, while a flexible;budget is adjusted for different activity levels.;c. The;static budget is constructed using input from only upper level management;while a flexible budget obtains input from alllevels of;management.;d. The;static budget is prepared only for units produced, while a;flexible budget reflects the number of units sold.;54. Another name for the static budget is;a. master budget.;b. overhead budget.;c. permanent budget.;d. flexible budget.;55. The master budget of Windy Co. shows that;the planned activity level for next year is expected to be 50,000 machine;hours. At this level of activity, the following manufacturing overhead costs;are expected;Indirect labor $720,000;Machine supplies 180,000;Indirect materials 210,000;Depreciation on factory building 150,000;Total manufacturing overhead $1,260,000;A flexible budget for a level of activity of 60,000 machine hours;would show total manufacturing overhead costs of;a. $1,482,000.;b. $1,260,000.;c. $1,512,000.;d. $1,362,000.;56. Boland;Manufacturing prepared a 2013 budget for 120,000 units of product. Actual;production in 2013 was 130,000 units. To be most useful, what amounts should a;performance report for this company compare?;a. The;actual results for 130,000 units with the original budget for 120,000 units.;b. The;actual results for 130,000 units with a new budget for 130,000units.;c. The;actual results for 130,000 units with last year's actualresults;for 134,000 units.;d. It doesn't matter. All of;these choices are equally useful.;57. A department has budgeted monthly;manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a;flexible budget report reflects $1,044,000 for total budgeted manufacturing;cost for the month, the actual level of activity achieved during the month was;a. 528,000 direct labor hours.;b. 168,000 direct labor hours.;c. 348,000 direct labor hours.;d. Cannot be determined from the information;provided.;58. Which one of the following would be the;same total amount on a flexible budget and a static budget if the activity;level is different for the two types of budgets?;a. Direct materials cost;b. Direct labor cost;c. Variable manufacturing overhead;d. Fixed manufacturing overhead;59. In developing a flexible budget within a;relevant range of activity;a. only fixed costs are included.;b. it is necessary to relate variable cost data;to the activity index chosen.;c. it is necessary to prepare a budget at 1,000;unit increments.;d. variable and fixed costs are combined and are;reported as a total cost.;60. What budgeted;amounts appear on the flexible budget?;a. Original;budgeted amounts at the static budget activity level;b. Actual;costs for the budgeted activity level;c. Budgeted;amounts for the actual activity level achieved;d. Actual;costs for the estimated activity level;61. The flexible budget;a. is prepared before the master budget.;b. is relevant both within and outside the;relevant range.;c. eliminates the need for a master budget.;d. is a series of static budgets at different;levels of activity.;62. A flexible budget can be prepared for which;of the following budgets comprising the master budget?;a. Sales;b. Overhead;c. Direct materials;d. All of these.;63. A flexible budget;a. is prepared when management cannot agree on;objectives for the company.;b. projects budget data for various levels of;activity.;c. is only useful in controlling fixed costs.;d. cannot be used for evaluation purposes;because budgeted data are adjusted to reflect actual results.;64. If a company plans to sell 48,000 units of;product but sells 60,000, the most appropriate comparison of the cost data;associated with the sales will be by a budget based on;a. the original planned level of activity.;b. 54,000 units of activity.;c. 60,000 units of activity.;d. 48,000 units of activity.;65. Within the relevant range of activity, the;behavior of total costs is assumed to be;a. linear and upward sloping.;b. linear and downward sloping.;c. curvilinear and upward sloping.;d. linear to a point and then level off.;66. Sales results that are evaluated by a;static budget might show;1. favorable;differences that are not justified.;2. unfavorable;differences that are not justified.;a. 1;b. 2;c. both 1 and 2.;d. neither 1 nor 2.;67. The selection of levels of activity to;depict a flexible budget;1. will;be within the relevant range.;2. is;largely a matter of expediency.;3. is;governed by generally accepted accounting principles.;a. 1;b. 2;c. 3;d. 1 and 2;68. Management by exception;a. causes managers to be buried under voluminous;paperwork.;b. means that all differences will be;investigated.;c. means that only unfavorable differences will;be investigated.;d. means that material differences will be;investigated.;69. Under management by exception, which;differences between planned and actual results should be investigated?;a. Material and noncontrollable;b. Controllable and noncontrollable;c. Material and controllable;d. All differences should be investigated;70. Best Shingle's;budgeted manufacturing costs for 50,000 squares of shingles are;Fixed manufacturing costs $12,000;Variable manufacturing costs $16.00;per square;Best produced 40,000 squares of shingles during March. How much are;budgeted total manufacturing costs in March?;a. $640,000;b. $812,000;c. $800,000;d. $652,000;71. A flexible budget depicted graphically;a. is identical to a CVP graph.;b. differs from a CVP graph in the way that;fixed costs are shown.;c. differs from a CVP graph in the way that;variable costs are shown.;d. differs from a CVP graph in that sales;revenue is not shown.;72. The activity index used in preparing the;flexible budget;a. is prescribed by generally accepted;accounting principles.;b. is only applicable to fixed manufacturing;costs.;c. is the same for all departments.;d. should significantly influence the costs that;are being budgeted.;73. A static budget is not appropriate in;evaluating a manager's effectiveness if a company has;a. substantial fixed costs.;b. substantial variable costs.;c. planned activity levels that match actual;activity levels.;d. no variable costs.;74. Shane Industries;prepared a fixed budget of 60,000 direct labor hours, with estimated overhead;costs of $300,000 for variable overhead and $90,000 for fixed overhead. Shane;then prepared a flexible budget at 57,000 labor hours. How much is total;overhead costs at this level of activity?;a. $285,000;b. $375,000;c. $370,500;d. $390,000;75. For June, Gold Corp.;estimated sales revenue at $600,000. It pays sales commissions that are 4% of;sales. The sales manager's salary is $285,000, estimated shipping expenses;total 1% of sales, and miscellaneous selling expenses are $15,000. How much are;budgeted selling expenses for the month of July if sales are expected to be $540,000?;a. $42,000;b. $327,000;c. $27,000;d. $330,000;76. Nikoto Steel Co. budgeted manufacturing;costs for 50,000 tons of steel are;Fixed manufacturing costs $50,000 per month;Variable manufacturing costs $12.00 per ton of steel;Nikoto produced 40,000 tons of steel;during March. How much is the flexible budget for total manufacturing costs for;March?;a. $520,000;b. $650,000;c. $480,000;d. $530,000;77. Smart;Manufacturing budgeted costs for 50,000 linear feet of block are;Fixed manufacturing costs $24,000 per month;Variable manufacturing costs $16.00 per linear foot;Smart installed 40,000 linear feet of;block during March. How much is budgeted total manufacturing costs in March?;a. $640,000;b. $824,000;c. $800,000;d. $664,000;78. In;the Dichter Co., indirect labor is budgeted for $72,000 and factory supervision;is budgeted for $24,000 at normal capacity of 160,000 direct labor hours. If 180,000;direct labor hours are worked, flexible budget total for these costs is;a. $96,000.;b. $108,000.;c. $105,000.;d. $99,000.
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