ch11 questions Flashcards
1
Q
EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000 Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 2,110,000 41. What was the budgeted variable costs per machine hour for variable overhead, rounded to the nearest whole cent? a. $7.03/machine hour b. $7.50/machine hour c. $19.53/machine hour d. $20.83/machine hour
A
b 7.50 per machine hour
2
Q
EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000 Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 2,110,000 42. What is the budgeted Direct Labour cost at the actual level of activity? a. $245,000 b. $240,000 c. $210,938 d. $20,000
A
b $240,000
225,000 / 150,000 x 160,000
3
Q
EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000 Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 2,110,000 43. What is the budgeted Fixed Overhead at the actual level of activity? a. $2,100,000 b. $2,110,000 c. $2,240,000 d. $3,260,000
A
key word is fixed
a. $2,100,000
4
Q
EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000 Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 44. What was the difference between the actual and budgeted Direct Material costs at the actual level of activity? a. $25,000 unfavourable b. $25,000 favourable c. $5,000 unfavourable d. $5,000 favourable
A
d
480,000
495,000
5
Q
- What possible reason could explain the difference between the actual fixed overhead costs and the budgeted fixed overhead costs?
a. EKPN Company’s actual machine hours were greater than the budgeted amount.
b. EKPN Company’s actual machine hours were less than the budgeted amount.
c. EKPN Company spent more on fixed costs than it expected.
d. EKPN Company spent less on fixed costs than expected
A
key word budgeted FIXED costs
c.
6
Q
- Perot Manufacturing reported the following items for 2012:
Income tax expense $ 40,000 Contribution margin 125,000 Controllable fixed costs 30,000 Interest expense 10,000 Total operating assets 475,000
How much is controllable margin?
a. $125,000
b. $95,000
c. $85,000
d. $45,000
A
Controllable margin formula:
Contribution margin - controllable fixed costs
b. $95,000
7
Q
- Kilroy Manufacturing prepared a 2012 budget for 40,000 units of product. Actual production in 2012 was 41,000 units. Which one of the following is the most useful comparison for this company?
a. The actual results for 41,000 units with a new budget for 41,000 units
b. The actual results for 41,000 units with the original budget for 40,000 units
c. The actual results for 41,000 units with the previous year’s actual results for 44,000 units
d. It doesn’t matter. All of these choices are equally useful.
A
a. the actual results for 41,000 units with a new budget for 41,000 units
8
Q
- Which one of the following statements describes a budget report?
a. It is the preparation of long-term plans.
b. It is a comparison of actual results with planned objectives.
c. It includes the valuation of inventories.
d. It is voted on and approved by the stockholders.
A
b
9
Q
- Which one of the following do budget reports provide for managers?
a. The cause of differences between actual and projected amounts
b. The nature of corrective action needed
c. Feedback on operations
d. Modification actions necessary
A
c
10
Q
- What is the purpose of a departmental overhead cost report?
a. To control corporate labour costs
b. To allocate uncontrollable costs
c. To determine the cause of any misuse of costs
d. To control overhead costs
A
d
11
Q
- What is the purpose of the sales budget report?
a. To control the cost of selling products in a company
b. To assess whether the company is profitable or not
c. To determine why sales goals were met or not met
d. To identify differences between planned and actual and take corrective action if necessary.
A
d
12
Q
- Which one of the statements below is correct concerning the comparison of differences between actual and planned results?
a. The difference must be reported on external financial statements.
b. The differences always require investigation.
c. It reflects information from the static budget.
d. It enables managers to take corrective action when differences are material.
A
d
13
Q
- Which one of the following is true concerning a static budget?
a. It is prepared at the end of the accounting period once actual results are known.
b. It is useful in evaluating a manager’s performance by comparing actual variable costs and planned variable costs.
c. It shows planned results at the original budgeted activity level.
d. It reflects the level of activity at which the company will be most profitable.
A
c
14
Q
- When is a static budget most appropriate in evaluating a manager’s performance?
a. When the actual costs incurred equal the amounts in the budget
b. When the actual activity is less than the master budget activity
c. When the company performed at the same activity level as the static budget level
d. The static budget is not appropriate for evaluating managers.
A
c
15
Q
- Which statement is true concerning a static budget report?
a. It considers performance at numerous activity levels.
b. It is appropriate in evaluating a manager’s effectiveness in controlling fixed costs.
c. It should be used when the actual level of activity is materially different from the master budget activity level.
d. It is most effective when evaluating a manager’s effectiveness in controlling variable costs.
A
b
