Question 1

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: Which items in the table have favorable variances?

Accepted Answer

Sales and research and development expense have favorable variances if actual sales exceed budgeted sales and actual R&D expenses are less than budgeted.

Question 2

BNN Ltd expects to operate at a profit in its next fiscal year. Which statement about its budgeted income statement is true?

Accepted Answer

Operating income is calculated before interest and taxes, while net profit is calculated after these deductions. Therefore, operating income is typically greater than net profit.

Question 3

Uncontrollable external factors can create challenges in measuring the results for which managers should be held responsible. Which of the following is the best example of an uncontrollable external factor for a manager who oversees all of the operations for a business?

Accepted Answer

Raw materials prices changing due to external factors such as environmental laws is an uncontrollable external factor for a manager. The manager has no control over these laws and therefore cannot be held responsible for any resulting changes in costs. Choices A, B, and D are all examples of factors that a manager may have some level of control or influence over, such as managing production volumes, purchasing direct materials, or conserving utilities.

Question 4

On a budgeted income statement, the gross margin is determined by

Accepted Answer

Gross margin is calculated by subtracting cost of goods sold from revenue. This gives a measure of how much profit is generated after accounting for the cost of producing the goods or services sold. Option A includes cost of goods sold in the calculation of gross margin, rather than subtracting it. Options B and C mix operating costs with cost of goods sold, which would not give an accurate measure of the profitability of the company's core operations.

Question 5

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: The variance for cost of goods sold could be explained by

Accepted Answer

When actual sales are greater than the budget, it often leads to higher production and thus higher cost of goods sold, explaining the variance.

Question 6

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below:  TFS' budgeted profit before taxes for the next financial year will be

Accepted Answer

The answer of TFS Ltd, a retail company selling hotel...

Question 7

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below:  TFS' actual profit for the next fiscal year will be

Accepted Answer

The answer of TFS Ltd, a retail company selling hotel...

Question 8

A budget that reflects a range of operations is called a

Accepted Answer

A flexible budget is designed to adjust for changes in operations and is able to accommodate varying levels of activity. It typically includes ranges rather than specific numbers, giving the organization more flexibility in its spending. The other options (standard, activity-based, and benchmark) are all specific types of budgets that may be used in certain situations, but do not necessarily reflect a range of operations.

Question 9

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: If ATR had a budgeted volume of 2,000 units, the total budgeted product cost for the third quarter of 2010 would have been

Accepted Answer

To calculate the total budgeted product cost for 2,000 units, we need to use the formula:

Total budgeted product cost = Budgeted unit cost x Budgeted volume

For 2,000 units, we can calculate the total budgeted product cost for each cost element as follows:

- Direct materials: $5 x 2,000 = $10,000
- Direct labor: $2 x 2,000 = $4,000
- Variable overhead: $1.50 x 2,000 = $3,000
- Fixed overhead: $3,500

Therefore, the total budgeted product cost for 2,000 units would be:

Total budgeted product cost = $10,000 + $4,000 + $3,000 + $3,500
Total budgeted product cost = $20,500

Therefore, the best choice is C) $20,500.

Question 10

Which of the following is a simple version of a flexible budget?

Accepted Answer

A cost-volume-profit analysis is a simplified version of a flexible budget as it examines how changes in costs and volume affect a company's operating income and net income.

Question 11

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below:  Which of the following amounts will be subtracted from gross profit on TFS' budgeted income statement?

Accepted Answer

The answer of TFS Ltd, a retail company selling hotel...

Question 12

In 2010, OSW budgeted its sales volume at 10,000 units. Actual volume was 9,800 units. If OSW uses the static budget to calculate variances and assuming that inventory levels are insignificant, which of the following statements is true?

Accepted Answer

The answer of In 2010, OSW budgeted its sales volume...

Question 13

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: If ATR's actual volume for the third quarter of 2010 was 15% above its expected volume

Accepted Answer

The answer of ATR's budgeted product costs for the third...

Question 14

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: The research and development cost variance could be explained by

Accepted Answer

The research and development cost variance can be explained by efficient cost management, as the actual costs were lower than the budgeted costs. This implies that SWP was able to effectively manage and control their expenses in this area.

Question 15

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: Which items in the table have unfavorable variances?

Accepted Answer

The answer of At the end of 2009, SWP prepared...

Question 16

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below:  SWP's total budget variance for the data provided is

Accepted Answer

The answer of At the end of 2009, SWP prepared...

Question 17

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below:  TFS' budgeted cost of goods available for sale for the next fiscal year will be

Accepted Answer

To calculate the budgeted cost of goods available for sale, we need to divide the budgeted ending inventory by 20% and then multiply the result by 100%. This is because the budgeted ending inventory is 20% of the cost of goods available for sale.

So, budgeted cost of goods available for sale = Budgeted ending inventory / 20% * 100%

Substituting the given data, we get:

Budgeted ending inventory = $7,000 
Budgeted cost of goods available for sale = $7,000 / 20% * 100% 
= $35,000

Therefore, the correct answer is D) $35,000.

Question 18

Static budgets

Accepted Answer

Static budgets are prepared in advance and are fixed, which means that they do not change with actual results. I is incorrect because static budgets are not adjusted for actual results, making them inflexible. On the other hand, II is correct because static budgets are created based on a specific level of activity or production, making them suitable for planning and forecasting. III is also correct because static budgets are not used for performance evaluation because they do not reflect actual results.

Question 19

Which of the following is based on forecasts of specific volumes of products or services?

Accepted Answer

Static budgets are based on forecasts of specific volumes of products or services and do not change with actual activity levels.

Question 20

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below:  ATR's total budgeted product cost for the third quarter of 2010 was

Accepted Answer

The answer of ATR's budgeted product costs for the third...

Quiz 11: Operational Budgets

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: Which items in the table have favorable variances?

BNN Ltd expects to operate at a profit in its next fiscal year. Which statement about its budgeted income statement is true?

Uncontrollable external factors can create challenges in measuring the results for which managers should be held responsible. Which of the following is the best example of an uncontrollable external factor for a manager who oversees all of the operations for a business?

On a budgeted income statement, the gross margin is determined by

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: The variance for cost of goods sold could be explained by

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: TFS' actual profit for the next fiscal year will be

A budget that reflects a range of operations is called a

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: If ATR had a budgeted volume of 2,000 units, the total budgeted product cost for the third quarter of 2010 would have been

Which of the following is a simple version of a flexible budget?

In 2010, OSW budgeted its sales volume at 10,000 units. Actual volume was 9,800 units. If OSW uses the static budget to calculate variances and assuming that inventory levels are insignificant, which of the following statements is true?

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: If ATR's actual volume for the third quarter of 2010 was 15% above its expected volume

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: The research and development cost variance could be explained by

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: Which items in the table have unfavorable variances?

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: SWP's total budget variance for the data provided is

Static budgets

Which of the following is based on forecasts of specific volumes of products or services?

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: ATR's total budgeted product cost for the third quarter of 2010 was