2024 – QUESTION 1 Net sales volume variance will not be favorable When actual units sold is greater than budgeted sales volume
Net sales volume variance will not be favorable – 2024
| QUESTION 1 |
| Net sales volume variance will not be favorable: |
| When actual units sold is greater than budgeted sales volume |
| When actual units sold are less than budgeted sales volume |
| When the sales volume variance is favorable |
| Under any of the above conditions |
| 2.5 points |
| QUESTION 2 |
| Which of the following is a suggested technique for managing the budgeting process in a manner that increases employee motivation? |
| Measure the budget against performance only when assessing poor performers |
| Never alter the budget |
| Top management should disassociate itself from the budget |
| Emphasize the budget as a planning device |
| 2.5 points |
| QUESTION 3 |
| In a manufacturing setting, the purchase budget is based on: |
| The sales budget |
| The production budget |
| The manufacturing labor budget |
| The cash disbursements |
| 2.5 points |
| QUESTION 4 |
| Which of the following is not used in the formulation of economic value added (EVA)? |
| A minimum rate of return set by top management |
| After tax income |
| The weighted average cost of capital |
| Total net assets |
| 2.5 points |
| QUESTION 5 |
| ______________ is the time a product exists–from conception to abandonment. |
| Product life cycle |
| Revenue producing life |
| Consumable life |
| Introduction stage |
| 2.5 points |
| QUESTION 6 |
| Brown Division operates as a revenue center. Data for this year are as follows: |
| Actual |
| Budget |
| Sales in Units |
| 44,000 |
| 40,000 |
| Selling price per unit |
| $190 |
| $200 |
| Variable expenses per unit |
| $140 |
| What is the total revenue variance? |
| $220,000 (U) |
| $360,000 (F) |
| $180,000 (F) |
| $220,000 (F) |
| 2.5 points |
| QUESTION 7 |
| Which of the following situations gives rise to the need for a transfer price? |
| Two divisions of the same company sell to the same wholesaler |
| Two divisions of the same company sell competing products to the same customer |
| Two divisions of the same company sell to one another |
| Both B and C |
| 2.5 points |
| QUESTION 8 |
| When determining net present value, this is commonly done to consider higher than normal risk associated with a proposed investment: |
| Decrease the discount rate used in the analysis |
| Decrease the expected cash flows |
| Increase the discount rate used in the analysis |
| Increase the required payback period |
| 2.5 points |
| QUESTION 9 |
| Which of the following capital budgeting techniques provides the decision maker with answers expressed in dollars? |
| Payback method |
| Internal rate of return |
| Net present value |
| None of the above |
| 2.5 points |
| QUESTION 10 |
| A flexible budget variance for a manufacturing cost is computed as the difference between: |
| Flexible budget costs and static budget costs |
| Actual costs and flexible budget costs |
| Departmental costs and cost center costs |
| Flexible budget costs and original budget costs |
| 2.5 points |
| QUESTION 11 |
| A precondition for effective capital budgeting requires having: |
| A clearly defined mission |
| A well-defined business strategy |
| Long-range goals |
| All of the above |
| 2.5 points |
| QUESTION 12 |
| Structuring performance reports and addressing them to individuals as group members of an organization in a manner that emphasizes factors that can be controlled by them is accomplished by using which of the following? |
| Absorption costing |
| Value chain analysis |
| Responsibility accounting |
| Relational concepts |
| 2.5 points |
| QUESTION 13 |
| Assume that the standard cost to make one unit of product includes 15 units of raw materials at a price of $3 per unit. In July, 34,000 units of raw materials were purchased for $100,800, and 30,600 units of raw materials were used to produce 2,000 units of finished product. What is the materials quantity variance? |
| $2,400 (U) |
| $1,800 (U) |
| $1,200 (F) |
| $1,200 (U) |
| 2.5 points |
| QUESTION 14 |
| Budgetary slack refers to: |
| Intentionally requesting more funds in the budget than needed |
| The time lag between budget preparation and actual operations. |
| Overspending the budget allowance |
| The time lag between budget discussions and actual preparation of budgets |
| 2.5 points |
| QUESTION 15 |
| A balanced scorecard typically includes: |
| Financial measures |
| Customer satisfaction measures |
| Internal processes measures |
| All of the above |
| 2.5 points |
| QUESTION 16 |
| The objective of standard cost variance analysis is: |
| To identify standard cost variances and to explain the reasons for their occurrences |
| To explore the reason or reasons for variation in sales prices of products offered in the company’s main line of business |
| To identify the standard deviation in budgeted numbers over a period of time |
| To purge cost data of the effects of inflation |
| 2.5 points |
| QUESTION 17 |
| Which of the following aspects related to budgeting and human behavior is not correct? |
| Budgets often produce strong reactions in people. |
| The preparation period for a participative budget is generally longer than that for an imposed budget. |
| A disadvantage of the use of budgets is that they always decrease employee motivation. |
| Personnel who do not participate in budget preparation are likely to lack a commitment in achieving their part of the budget. |
| 2.5 points |
| QUESTION 18 |
| Information for Tube division is as follows: |
| – Net earnings for division $40,000 |
| – Asset base for division$100,000 |
| – Target rate of return 16% |
| – Operating income margin 12% |
| – Weighted average cost of capital 8%. |
| What is Tube’s residual income? |
| $26,000 |
| $24,000 |
| $32,000 |
| $95,200 |
| 2.5 points |
| QUESTION 19 |
| Which of the following is not an advantage of ROI? |
| It encourages managers of departments with high ROIs to invest in average ROI projects. |
| It encourages managers to pay careful attention to the relationships among sales, expenses, and investment. |
| It encourages cost efficiency. |
| It discourages excessive investment in operating assets. |
| 2.5 points |
| QUESTION 20 |
| Bosworth Boots, Inc. is considering the production of a new line of boots. Based on preliminary market research, management has decided that each pair of boots should be priced at $225. Furthermore, management believes that the profit margin should be 30 percent of sales revenue. |
| What is the target cost? |
| $150.75 |
| $225.50 |
| $260.00 |
| $157.50 |
| 2.5 points |
| QUESTION 21 |
| Birchtown Company’s budgeted sales were 5,000 units at $400 per unit. Actual sales were 4,500 units at $420 per unit. Birchtown’s sales price variance was: |
| $ 34,000 (U) |
| $100,000 (U) |
| $ 90,000 (F) |
| $ 45,000 (F) |
| 2.5 points |
| QUESTION 22 |
| The Rob Wallace Corporation has a sales budget for next month of $400,000. Cost of goods sold (all of which is merchandise) is expected to be $250,000. All goods are paid for in the month following their purchase. The beginning inventory of merchandise is $16,000, and an ending inventory of $12,000 is desired. Beginning accounts payable is $52,000. How much merchandise inventory will The Rob Wallace Corporation need to purchase next month? |
| $2,50,000 |
| $1,90,000 |
| $2,46,000 |
| $4,00,000 |
| 2.5 points |
| QUESTION 23 |
| The return on investment is computed as: |
| Operating income divided by sales |
| Operating income divided by average operating assets |
| Sales divided by average operating assets |
| Operating asset turnover divided by the operating income margin |
| 2.5 points |
| QUESTION 24 |
| Clarinet Publishing is considering the purchase of a used printing press costing $38,400. The printing press would generate a net cash inflow of $20,000 a year for 5 years. At the end of 5 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The investment’s payback period in years (rounded to two decimal points) is: |
| 2.56 |
| 2.13 |
| 1.92 |
| 3 |
| 2.5 points |
| QUESTION 25 |
| Generally, the first of the following budgets to be prepared is the: |
| Cash budget |
| Operations budget |
| Sales budget |
| Purchases budget |
| 2.5 points |
| QUESTION 26 |
| In a segment report for territories, the contribution margin less direct segment fixed costs is typically called the: |
| Segment sales |
| Product sales |
| Territory margin |
| Fixed costs |
| 2.5 points |
| QUESTION 27 |
| The internal rate of return: |
| Does not require a predetermined discount rate |
| Is often used to rank investment proposals |
| May be compared to the cost of capital in project evaluation |
| All of the above |
| 2.5 points |
| QUESTION 28 |
| Assume that the standard cost to make one finished unit includes 2 hour of direct labor at $8 per hour. During April, 22,000 direct labor-hours were worked, 10,500 units of product were manufactured, and total direct labor cost was $160,000. What is the labor rate variance for April? |
| $ 2,000 (U) |
| $ 2,000 (F) |
| $16,000 (U) |
| $16,000 (F) |
| 2.5 points |
| QUESTION 29 |
| Budgets based on the actual level of output, rather than the output originally budgeted, are called: |
| Activity budgets |
| Flexible budgets |
| Operating budgets |
| Static budgets |
| 2.5 points |
| QUESTION 30 |
| Cameo Company manufactures boxes. To manufacture a box, it takes 44 units of wood and 2 units of plastic. Scheduled production of boxes for the next two months is 2,100 and 2,500 boxes, respectively. Beginning inventory is 16,000 units of wood and 120 units of plastic. The ending inventory of wood is planned to decrease 4,000 units each of the next two months, and the plastic inventory is expected to increase 20 units each of the next two months. Based on this information, the number of units of wood that Cameo needs to purchase during the first month is: |
| 84,000 units |
| 82,000 units |
| 8,000 units |
| 88,400 units |
| 2.5 points |
| QUESTION 31 |
| When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally: |
| The one that creates the highest margin to the selling unit |
| The price at which the product sells in the external market |
| One that is higher than what the outside market is quoting |
| Based on management accounting numbers |
| 2.5 points |
| QUESTION 32 |
| What is residual income? |
| Excess income earned after budgeted income has been achieved |
| The excess of investment center income over the minimum return set by management |
| A percentage of income received by an organization for its participation in a joint venture |
| Income beyond the breakeven point determined by the product’s lifecycle |
| 2.5 points |
| QUESTION 33 |
| Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. |
| Year |
| Present Value of $1.00 @ 10% per year |
| 1 |
| 0.909 |
| 2 |
| 0.826 |
| 3 |
| 0.751 |
| 4 |
| 0.683 |
| Determine the net present value for the investment. The investment’s net present value is: |
| $5,480 |
| $19,200 |
| $76,800 |
| $8,832 |
| 2.5 points |
| QUESTION 34 |
| ______________ is (are) the difference between the sales price needed to capture a predetermined market share and the desired profit per unit. |
| Gross profit |
| Target cost |
| Target price |
| Contribution margin |
| 2.5 points |
| QUESTION 35 |
| A project under consideration has a net present value of $10,000 for a required investment of $60,000. There are no other investment options at this time. However, the assumed discount rate used to calculate the net present value is 20%. On the basis of this information alone, this project should: |
| Definitely be rejected because $10,000 is only 17% of $60,000 |
| Be rejected on the basis that the project loses $50,000 |
| Probably be approved since the net present value is greater than zero |
| Be accepted if the cost of capital is greater than or equal to 20 percent |
| 2.5 points |
| QUESTION 36 |
| Which of the following amounts would be classified as part of the disinvestment phase for a project? |
| Depreciation |
| Collections of accounts receivable from sales |
| Expenditure to return plant site to its pre-project condition |
| Retiring bonds issues to finance the project |
| 2.5 points |
| QUESTION 37 |
| ________________ is a systematic approach to identifying the best practices to help an organization take action to improve performance. |
| Target costing |
| ISO 9000 |
| Activity-based management |
| Benchmarking |
| 2.5 points |
| QUESTION 38 |
| Tom Gilgen is considering the production of a new line of jeans. Based on preliminary market research, management has decided that each pair of jeans should be priced at $170. Furthermore, management believes that the profit margin should be 25 percent of sales revenue. What is the target cost? |
| $62.00 |
| $950.75 |
| $112.00 |
| $127.50 |
| 2.5 points |
| QUESTION 39 |
| An awareness of the impact of today’s actions on tomorrow’s costs is a concept that underlies which of the following notions? |
| Marginal revenue |
| Target pricing |
| Kanban systems |
| Life-cycle costs |
| 2.5 points |
| QUESTION 40 |
| What is a transfer price? |
| The amount charged for a product or service that one division provides another |
| The amount charged for goods and services offered to the government |
| An amount charged to cover the costs associated with import/export taxes |
| The amount charged the final consumer to cover all costs incurred along the value chain |
| 2.5 points |
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