Chapter 21 - Multiple Choice - principlesofaccounting.com

1. Question

With the top-down budgeting approach the budget:

Process begins with the issuance of general budget guidelines by top management or a budget committee.
Developmental process centers on lower-level employee participation.
Is imposed on lower-level personnel who do not become involved in the budget construction process in a significant way.
Is not characterized by sound budget preparation practices.

2. Question

Which of the following statements is incorrect?

The cash budget is an element of a master budget.
The direct labor budget is specifically dependent on the production budget.
The budgeting process would normally begin with preparation of a sales budget.
A continuous budget is feasible only for sales projections.

3. Question

Roland Corporation budgeted April sales at 2,500 units. The beginning finished goods inventory consisted of 2,000 units, however, Roland desired to have 2,500 finished units on hand by the end of April. Direct materials inventory consisted of 800 beginning units and Roland desired an ending balance of 1,400 units. Each finished unit required 2 units of direct material and 1 hour of direct labor. Direct materials cost $3.00 per unit, direct labor cost $11.00 per hour, and factory overhead is applied at $7.00 per direct labor hour. Roland has no work in process at the beginning or end of the month. How much is the anticipated cost of goods manufactured for April?

$51,000
$57,600
$72,000
$73,800

4. Question

Bright Company manufactures mirrors which require 8 square feet of glass per mirror. Bright anticipates production of 500 units in January, 700 units in February, and 1,700 units in March. Bright maintains glass on hand equal to 40% of the following month’s anticipated production requirements. The glass costs $3 per square foot. At the beginning of January, only 500 square feet of glass is on hand. How many square feet of glass should Bright plan to buy in February?

2,200 square feet
5,440 square feet
8,800 square feet
11,040 square feet

5. Question

Hanson anticipates unit sales during the first three months of the upcoming year at 5,000 for January, 4,000 for February, and 8,000 for March. If Hanson wishes to maintain its finished goods inventory at 80% of the following month’s sales, and the January 1 finished goods inventory consisted of 1,000 units, how many units must Hanson produce in January?

3,200
6,400
7,200
8,000

6. Question

O’Connor Corporation had December sales of $30,000. Anticipated sales during January are $40,000, and February sales are projected at $37,500. Of sales made, 40% are for cash and 60% are on account. Sales on account are expected to be collected 50% in the month of sale, 45% in the month following the month of sale, and 5% ultimately prove uncollectible. How much are anticipated cash collections during the month of February?

$25,800
$26,250
$36,100
$37,050

7. Question

Scanlon Corporation has estimated its activity for April as follows:

Sales

$800,000

Gross profit (based on sales)

40%

Increase in accounts receivable during month

10,000

Increase in finished goods inventory during month

30,000

Total selling and administrative costs

80,000

Depreciation included in selling and administrative costs

25,000

Scanlon has no raw material or work in process inventory at the beginning or end of April. On the basis of the above, what are estimated cash disbursements for April?

$510,000
$533,000
$535,000
$565,000

8. Question

Blinder Corporation projected the following:

Sales

$5,000,000

Fixed manufacturing costs

2,000,000

Blinder projects variable manufacturing costs of 40% of sales. Assuming no change in inventory, what will be the projected cost of goods sold?

$2,000,000
$3,000,000
$4,000,000
$5,000,000

Chapter 21 - Multiple Choice