Exam: 061683RR - PLANNING, PERFORMANCE
Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the entire question and all the answers before choosing an answer.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expense s $9,240
Administrative expenses $3,239
1. The revenue variance for December would be closest to
A. $3,680 U.
B. $3,680 F.
C. $3,429 F.
D. $3,429 U.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
2. The medical supplies in the flexible budget for December would be closest to
A. $17,472.
B. $17,378.
C. $18,150.
D. $18,105.
3. There are various budgets within the master budget. One of these budgets is the production budget.
Which of the following best describes the production budget?
A. It details the required direct-labor hours.
B. It details the required raw materials purchases.
C. It summarizes the costs of producing units for the budget period.
D. It's calculated based on the sales budget and the desired ending inventory.
Use the following information to answer this question.
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700
client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expense s $9,508
Administrative expenses $4,772
4. The activity variance for administrative expenses in January would be closest to
A. $8 F.
B. $12 F.
C. $8 U.
D. $12 U.
5. The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of the
year. The budgeted variable factory overhead is $5.00 per direct-labor hour; the budgeted fixed factory
overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct-labor time
for December is 8,000 hours, then total budgeted factory overhead per direct-labor hour (rounded) is
A. $9.38.
B. $12.50.
C. $16.25.
D. $14.38.
Use the following information to answer this question.
The Adams Company, a merchandising firm, has budgeted its activity for November according to the
following information:
• Sales were at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance on November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
6. The budgeted cash disbursements for November are
A. $375,000.
B. $405
7. The activity variance for personnel
expenses in December would be closest to
A. $71 U.
B. $2,361 F.
C. $2,361 U.
D. $71 F.
8. The spending variance for medical supplies
in December would be closest to
A. $725 U.
B. $725 F.
C. $680 F.
D. $680 U.
9. Coles Company, Inc. makes and sells a
single product, Product R. Three yards of Material K are needed to make one
unit of Product R. Budgeted production of Product R for the next five months is
as follows:
August 14,000
units
September 14,500 units
October 15,500 units
November 12,600 units
December 11,900 units
The company wants to maintain
monthly ending inventories of Material K equal to 20% of the following month's
production needs. On July 31, this requirement wasn't met because only 2,500
yards of Material K were on hand. The cost of Material K is $0.85 per yard. The
company wants to prepare a Direct Materials Purchase Budget for the rest of the
year.
The total cost of Material K to
be purchased in August is
A. $42,300.
B. $40,970.
C. $48,200.
D. $33,840.
10. The total variance (both rate
and efficiency) for variable overhead for January is
A. $100 U.
B. $85 F.
C. $40 F.
D. $125 F.
11. Vandall Corporation
manufactures and sells a single product. The company uses units as the measure of
activity in its budgets and performance reports. During April, the company
budgeted for 7,300 units, but its actual level of activity was 7,340 units.
The overall revenue and
spending variance (i.e., the variance for net operating income in the revenue
and spending variance column on the flexible budget performance report) for
April would be closest to
A. $6,740 U.
B. $6,144 F.
C. $6,144 U.
D. $6,740 F.
12. The budgeted net income for
November is
A. $135,000.
B. $75,000.
C. $50,000.
D. $68,000.
13. The cash budget must be
prepared before you can complete the
A. production budget.
B. raw materials purchases budget.
C. budgeted balance sheet.
D. schedule of cash disbursements.
14. The company plans to sell
22,000 units of Product WZ in June. The finished-goods inventories on June 1
and June 30 are budgeted to be 100 and 400 units, respectively. The direct
labor hours are 11,000 and the direct labor rate is $10.50. Budgeted
direct-labor costs for June would be
A. $455,700.
B. $117,075.
C. $462,000.
D. $234,150.
Use the following information
to answer this question.
Cole Laboratories makes and
sells a lawn fertilizer called Fastgro. The company has developed standard costs
for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material l 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning
inventories of any kind on January 1. Variable overhead is applied to
production on the basis of
standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000
bags
• Direct materials purchased:
85,000 pounds at a cost of $32,300
• Direct-labor worked: 390
hours at a cost of $4,875
• Variable overhead incurred:
$1,475
• Inventory of direct materials
on January 31: 3,000 pounds
15. The labor rate variance for
January is
A. $585 U.
B. $475 U.
C. $475 F.
D. $585 F.
Use the following information
to answer this question.
Cole Laboratories makes and
sells a lawn fertilizer called Fastgro. The company has developed standard costs
for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material l 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning
inventories of any kind on January 1. Variable overhead is applied to
production on the basis of
standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000
bags
• Direct materials purchased:
85,000 pounds at a cost of $32,300
• Direct-labor worked: 390
hours at a cost of $4,875
• Variable overhead incurred:
$1,475
• Inventory of direct materials
on January 31: 3,000 pounds
16. The materials price variance
for January is
A. $1,640 U.
B. $1,300 U.
C. $1,640 F.
D. $1,700 F.
17. The LFM Company makes and sells
a single product, Product T. Each unit of Product T requires 1.3 hours of
direct labor at a rate of $9.10 per direct-labor hour. LFM Company needs to
prepare a direct-labor budget for the second quarter of next year. The budgeted
direct-labor cost per unit of Product T would be
A. $7.00.
B. $9.10.
C. $11.83.
D. $10.40.
18. Division X of Charter
Corporation makes and sells a single product which is used by manufacturers of fork
lift trucks. Presently it sells 12,000 units per year to outside customers at
$24 per unit. The annual capacity is 20,000 units and the variable cost to make
each unit is $16. Division Y of Charter Corporation would like to buy 10,000
units a year from Division X to use in its products. There would be no cost savings
from transferring the units within the company rather than selling them on the
outside market.
What should be the lowest
acceptable transfer price from the perspective of Division X?
A. $16.00
B. $24.00
C. $21.40
D. $17.60
19. A company's average operating
assets are $220,000, and its net operating income is $44,000. The
company invested in a new
project, increasing average assets to $250,000 and increasing its net operating
income to $49,550. What is the project's residual income if the required rate
of return is 20%?
A. $450
B. ($450)
C. ($600)
D. $600
20. The activity variance for net
operating income in January would be closest to
A. $2,019 U.
B. $489 F.
C. $489 U.
D. $2,019 F.
Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the entire question and all the answers before choosing an answer.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expense s $9,240
Administrative expenses $3,239
1. The revenue variance for December would be closest to
A. $3,680 U.
B. $3,680 F.
C. $3,429 F.
D. $3,429 U.
Use the following information to answer this question.
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for
3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the
following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
2. The medical supplies in the flexible budget for December would be closest to
A. $17,472.
B. $17,378.
C. $18,150.
D. $18,105.
3. There are various budgets within the master budget. One of these budgets is the production budget.
Which of the following best describes the production budget?
A. It details the required direct-labor hours.
B. It details the required raw materials purchases.
C. It summarizes the costs of producing units for the budget period.
D. It's calculated based on the sales budget and the desired ending inventory.
Use the following information to answer this question.
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700
client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expense s $9,508
Administrative expenses $4,772
4. The activity variance for administrative expenses in January would be closest to
A. $8 F.
B. $12 F.
C. $8 U.
D. $12 U.
5. The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of the
year. The budgeted variable factory overhead is $5.00 per direct-labor hour; the budgeted fixed factory
overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct-labor time
for December is 8,000 hours, then total budgeted factory overhead per direct-labor hour (rounded) is
A. $9.38.
B. $12.50.
C. $16.25.
D. $14.38.
Use the following information to answer this question.
The Adams Company, a merchandising firm, has budgeted its activity for November according to the
following information:
• Sales were at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance on November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
6. The budgeted cash disbursements for November are
A. $375,000.
B. $405
7. The activity variance for personnel
expenses in December would be closest to
A. $71 U.
B. $2,361 F.
C. $2,361 U.
D. $71 F.
8. The spending variance for medical supplies
in December would be closest to
A. $725 U.
B. $725 F.
C. $680 F.
D. $680 U.
9. Coles Company, Inc. makes and sells a
single product, Product R. Three yards of Material K are needed to make one
unit of Product R. Budgeted production of Product R for the next five months is
as follows:
August 14,000
units
September 14,500 units
October 15,500 units
November 12,600 units
December 11,900 units
The company wants to maintain
monthly ending inventories of Material K equal to 20% of the following month's
production needs. On July 31, this requirement wasn't met because only 2,500
yards of Material K were on hand. The cost of Material K is $0.85 per yard. The
company wants to prepare a Direct Materials Purchase Budget for the rest of the
year.
The total cost of Material K to
be purchased in August is
A. $42,300.
B. $40,970.
C. $48,200.
D. $33,840.
10. The total variance (both rate
and efficiency) for variable overhead for January is
A. $100 U.
B. $85 F.
C. $40 F.
D. $125 F.
11. Vandall Corporation
manufactures and sells a single product. The company uses units as the measure of
activity in its budgets and performance reports. During April, the company
budgeted for 7,300 units, but its actual level of activity was 7,340 units.
The overall revenue and
spending variance (i.e., the variance for net operating income in the revenue
and spending variance column on the flexible budget performance report) for
April would be closest to
A. $6,740 U.
B. $6,144 F.
C. $6,144 U.
D. $6,740 F.
12. The budgeted net income for
November is
A. $135,000.
B. $75,000.
C. $50,000.
D. $68,000.
13. The cash budget must be
prepared before you can complete the
A. production budget.
B. raw materials purchases budget.
C. budgeted balance sheet.
D. schedule of cash disbursements.
14. The company plans to sell
22,000 units of Product WZ in June. The finished-goods inventories on June 1
and June 30 are budgeted to be 100 and 400 units, respectively. The direct
labor hours are 11,000 and the direct labor rate is $10.50. Budgeted
direct-labor costs for June would be
A. $455,700.
B. $117,075.
C. $462,000.
D. $234,150.
Use the following information
to answer this question.
Cole Laboratories makes and
sells a lawn fertilizer called Fastgro. The company has developed standard costs
for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material l 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning
inventories of any kind on January 1. Variable overhead is applied to
production on the basis of
standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000
bags
• Direct materials purchased:
85,000 pounds at a cost of $32,300
• Direct-labor worked: 390
hours at a cost of $4,875
• Variable overhead incurred:
$1,475
• Inventory of direct materials
on January 31: 3,000 pounds
15. The labor rate variance for
January is
A. $585 U.
B. $475 U.
C. $475 F.
D. $585 F.
Use the following information
to answer this question.
Cole Laboratories makes and
sells a lawn fertilizer called Fastgro. The company has developed standard costs
for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material l 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning
inventories of any kind on January 1. Variable overhead is applied to
production on the basis of
standard direct-labor hours. During January, the company recorded the following
activity:
• Production of Fastgro: 4,000
bags
• Direct materials purchased:
85,000 pounds at a cost of $32,300
• Direct-labor worked: 390
hours at a cost of $4,875
• Variable overhead incurred:
$1,475
• Inventory of direct materials
on January 31: 3,000 pounds
16. The materials price variance
for January is
A. $1,640 U.
B. $1,300 U.
C. $1,640 F.
D. $1,700 F.
17. The LFM Company makes and sells
a single product, Product T. Each unit of Product T requires 1.3 hours of
direct labor at a rate of $9.10 per direct-labor hour. LFM Company needs to
prepare a direct-labor budget for the second quarter of next year. The budgeted
direct-labor cost per unit of Product T would be
A. $7.00.
B. $9.10.
C. $11.83.
D. $10.40.
18. Division X of Charter
Corporation makes and sells a single product which is used by manufacturers of fork
lift trucks. Presently it sells 12,000 units per year to outside customers at
$24 per unit. The annual capacity is 20,000 units and the variable cost to make
each unit is $16. Division Y of Charter Corporation would like to buy 10,000
units a year from Division X to use in its products. There would be no cost savings
from transferring the units within the company rather than selling them on the
outside market.
What should be the lowest
acceptable transfer price from the perspective of Division X?
A. $16.00
B. $24.00
C. $21.40
D. $17.60
19. A company's average operating
assets are $220,000, and its net operating income is $44,000. The
company invested in a new
project, increasing average assets to $250,000 and increasing its net operating
income to $49,550. What is the project's residual income if the required rate
of return is 20%?
A. $450
B. ($450)
C. ($600)
D. $600
20. The activity variance for net
operating income in January would be closest to
A. $2,019 U.
B. $489 F.
C. $489 U.
D. $2,019 F.
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