Reference no: EM133174587

Multiple choice questions -

Q1. One of the disadvantages of a static budget is that:

a) It is more difficult to develop than a flexible budget

b) It is made for only one level of activity

c) Variances tend to be smaller than when flexible budgeting is used

d) Variances are more difficult to calculate than when flexible budgeting is used

Q2. A controller prepared a flexible budget for the fiscal year just ended, adjusting the initial budget to the unexpectedly large increase in sales volumes. The costs are mainly variable. The controller is pleased to note that actual sales and costs are approaching the amounts shown in the flexible budget. If actual sales and costs are compared to the amounts in the original (static) budget, what are the variances?

a) Sales variances and cost variances would be favorable

b) Sales variances would be favorable and cost variances unfavorable

c) Sales variances would be unfavorable and cost variances favorable

d) Sales variances and cost variances would be unfavorable

Q3. All of the following would be included in a cost of goods manufactured statement except

a) Stock of products being finished

b) Inventory of beginning finished goods

c) Cost of raw materials used

d) Indirect manufacturing costs

Q4. The financial statements included in the annual report to shareholders are the least useful for

a) Securities brokers (shares)

b) The bankers who are preparing to lend the money

c) Competing companies

d) Those responsible for operational activities

Q5. A company plans to sell one of its divisions that generates $20,000 in variable cost margin. An amount of $50,000 of common fixed costs is allocated to the division, of which $5,000 cannot be eliminated. The effect of selling this division on the profit will be to increase it by:

a) $5,000

b) $20,000

c) $25,000

d) $30,000

Q6. What is the most important difference between activity-based costing and traditional product-based costing:

a) Activity-based costing accumulates indirect costs in a large number of cost groups, while traditional product-based costing accumulates indirect costs in a few cost groups or even a single one

b) Activity-based costing allocates overhead based on cost drivers, while traditional product-based costing allocates overhead using allocation bases that are not cost drivers.

c) Activity-based costing allocates overhead based on financial and non-financial cost drivers, while traditional product-based costing allocates overhead only based on financial cost drivers.

d) Activity-based costing uses indirect allocation criteria as cost drivers, while traditional product-based costing uses direct allocation criteria as cost drivers.

Q7. The company's actual manufacturing overhead amounted to $475,000 for the year with a total of 105,000 direct labor hours spent on orders. Knowing that the predetermined imputation rate is 4 per direct labor hour, which of the following is true?

a) The company understated its indirect manufacturing costs by $55,000

b) The company overcharged its indirect manufacturing costs by $55,000

c) The company understated its indirect manufacturing costs by $13,750

d) The company overcharged its indirect manufacturing costs of $13,750

Q8. To manufacture one unit of its final product, the company needs technically (standards) 5 hours of direct labor of category A which costs 25$/hour and 10 hours of labor of category B which costs $12/hour. The company manufactured 1,400 units during the month of September requiring 22,400 hours of direct labor according to the following distribution 25% of the time in category A and 75% of the time in category B. The difference in composition and the labor yield gap are respectively:

a) $24,650 (favorable) and $22,660 (unfavorable)

b) $24,650 (unfavourable) and $22,660 (favourable)

c) $24,271 (in favor) and $22,871 (against)

d) $24,271 (against) and $22,871 (favour)

Q9. A company sells products X and Y, X represents 40% of the total turnover. The margin on variable costs is 30% in the case of X and 60% in the case of Y. The fixed costs amount to $200,000. What would be the total turnover needed for the company to achieve a target profit of $40,000 before taxes?

a) $200,000

b) $300,000

c) $444,444

d) $500,000

Q10. At the end of 2018, the company's accounts showed a credit balance of $81,000 in allocated manufacturing overhead after recording the actual manufacturing overhead on the debit side. The company charged a total of $300,000 in manufacturing overhead during the year. In addition, it had the following balances at the end of 2018:

Inventory of products in progress $384,000

Stock of finished products $96,000

Cost of goods sold $720,000

What would be the balance of cost of goods sold after disposing of the allocation difference of $81,000.

a) $671,400

b) $801,000

c) $768,000

d) $639,000

Q11. A company manufactures pool tables. In order number 18W, 7 tables are considered defective and need repair (rework) including the following direct costs:

Direct labor $750

Raw material 470$

Manufacturing overhead is charged at 300% of direct manufacturing labor costs.

If the repair costs are added to the cost of the 18W order, then the accounting entry to record the repair costs consists of debiting:

a) Indirect manufacturing costs for $3,470

b) The stock of products in progress of $3,470

c) Indirect manufacturing costs for $2,250

d) The stock of products in progress of $1,220