Cost and Managerial Accounting II

Model Exit Questions

Choose the best answer for the following questions and put your letter of response on the separate
provided answer sheet (1 point each)

1) Which of the following is true about CVP assumptions?

A. Units manufactured equal to units sold.
B. All revenues and costs can be added and compared without taking into account the time value of
money.
C. The unit selling price, unit variable costs, and fixed costs are known and constant.
D. All of the above.
E. None of the above.
2) Break even sale in unit is:
A. Quantity of output sold at which the operating income is zero.
B. Quantity of output sold that makes total revenue equals total cost.
C. Quantity of output sold that makes total revenue equals total cost plus operating income.
D. All of the above.
E. None of the above
3) Which of the following would not affect the break-even point?
A. Number of units sold C. Total fixed expenses
B. Variable expense per unit D. Selling price per unit
 4) The contribution margin ratio always increases when the:
A. Break-even point increases.
B. Break-even point decreases.
C. Variable expenses as a percentage of net sales decrease.
D. Variable expenses as a percentage of net sales increase
5) If a company increases its selling price by Br 2 per unit due to an increase in its variable labor cost of Br 2 per
unit, the break-even point in units will:
A. Decrease
B. Increase
C. Not change.
D. Change but direction cannot be determined.
6) As volume decreases,
A. Variable cost per unit decreases. C. Variable cost in total remains the same.
B. Fixed cost in total decreases. D. Fixed cost per unit increases
7) The break-even point in unit sales is found by dividing total fixed expenses by:
A. The contribution margin ratio
B. The variable expenses per unit
C. The sales price per unit
D. The contribution margin per unit
8) Bethlehem Shoe Company is a single product firm. Bethlehem is predicting that a price increase next year will
not cause unit sales to decrease. What effect would this price increase have on the following items for next
year?

Contribution Margin Ratio Break-Even Point

A. Increase Decrease
B. Decrease Decrease
C. Increase No effect
D. Decrease No effect

9) In evaluating different alternatives, it is useful to concentrate on

A. Variable costs. C. Total costs.
B. Fixed costs. D. Relevant costs.
 10) Which of the following statements describes variable costs?
A. Costs that vary on a per-unit basis as the level of activity changes
B. Costs that vary in total in direct proportion to changes in the level of activity.
C. Costs that remain the same in total dollar amount as the level of activity changes.
D. Costs that vary on a per-unit basis but remain the same in total as the level of activity changes.
11) Darth Company sells three products. Sales and contribution margin ratios for the three products follow:

Product A B C
Sales in Birrs Br 20,000 Br 40,000 Br 100,000
contribution margin ratio 45% 40% 15%
Given these data, the contribution margin ratio for the company as a whole would be:
 A. 25% B. 75% C. 33.3%

D. It is impossible to determine from the given data

12) The following information relates to the break-even point at ABC Corporation:
Sales in Birrs Br 120000
Total Fixed Costs 30000
If ABC wants to generate net operating income of 12,000, what will its sales in birrs have to be?

A. Br 132,000 C. Br 168,000
B. Br 136,000 D. Br 176,000

13) ABC Company is a medium-sized manufacturer of Brocket and Precast Beam. During the year a new line
called “Kobilstone” was made available to ABC's customers. The break-even point for sales of Kobilstone is
Br 200,000 with a contribution margin of 40%. Assuming that the profit for the Kobilstone line during the
year amounted to Br 100,000, total sales during the year would have amounted to:
A. Br 300,000 C. Br 450,000
B. Br 420,000 D. Br 475,000
14) XYZ Company sells a single product at a selling price of Br 15.00 per unit. Last year, the company's sales
revenue was Br 225,000 and its net operating income was Br 18,000. If fixed expenses totaled Br 72,000 for
the year, the break-even point in unit sales was
 A. 15,000 C. 14,100
B. 9,900 D. 12,000

15) Zumra Company manufactures and sells two types of beach towels, Standard and Deluxe. Zumra expects
the following operating results next year for each type of towel:
Standard Deluxe
Sales Br 450,000 Br 50,000
Variable expenses (total) Br 360,000 Br 20,000
Zumra expects to have a total of Br 57,600 in fixed expenses next year. What is Zumra’s break-
even point next year in sales dollars?
A. Br 72,000 C. Br 192,000
B. Br 144,000 D. Br 240,000
 16) In the middle of the year, the price of Lake Corporation's major raw material increased
by 8%. How would this increase affect the company's break-even point and margin of safety?
Breakeven point Margin of safety
A. Increase Increase
B. Increase Decrease
C. Decrease Decrease
D. Decrease Increase

17) In calculating the break-even point for a multi-product company, which of the following assumptions are
commonly made?
1) Selling prices are constant.
2) Variable expenses are constant per unit.
3) The sales mix is constant.
A. 1 and 2 C. 2 and 3
B. 1 and III D. 1, 2, and 3
18) Carver Company produces a product which sells for Br 40. Variable manufacturing costs are Br 18 per unit.
Fixed manufacturing costs are Br 5 per unit based on the current level of activity, and fixed selling and
administrative costs are Br 4 per unit. A selling commission of 15% of the selling price is paid on each unit
sold. The contribution margin per unit is:
A. Br 7 C. Br 22
B. Br 17 D. Br 16
19) Variable expenses for Alpha Company are 40% of sales. What are sales at the breakeven point,
assuming that fixed expenses total Br 150,000 per year:
 A. Br 250,000 C. Br 600,000
B. Br 375,000 D. Br 150,000
20) In a make-or-buy decision, relevant costs include:
A. Unavoidable fixed costs D. Fixed selling and administrative
B. Avoidable fixed costs expenses
C. Fixed factory overhead costs applied
to products
21) In one-time-special order
A. Relevant cost equals variable costs to make special order
B. The special order will be accepted if the incremental revenue exceeds the incremental costs, if it has
no long-run implications
C. Manufactures do not accept a special order if it has a negative impact on the operating income.
D. All of the above
E. B and C

22) Sunk costs

A. Are relevant. D. Are ignored when evaluating
B. Are differential. alternatives
C. Have future implications.
23) When a multi-product factory operates at full capacity, decisions must be made about what products to
emphasize. In making such decisions, products should be ranked based on:
A. Selling price per unit
B. Contribution margin per unit
C. Contribution margin per unit of the constraining resource
D. Unit sales volume
24) Kahn Company produces and sells 8,000 units of Product X each year. Each unit of Product X sells for
Br 10 and has a contribution margin of Br 6. It is estimated that if Product X is discontinued, Br 50,000 of the
Br 60,000 in fixed costs charged to Product X could be eliminated. These data indicate that if Product X is
discontinued, overall company net operating income should:
A. Increase by $2,000 per year
B. Decrease by $2,000 per year
C. Increase by $38,000 per year
D. Decrease by $38,000 per ye
25) The following information relates to next year's projected operating results of the Aluminum Division of
Wroclaw Corporation:

Contribution margin Br 1,500,000

Fixed Costs Br 1,700,000
Net operating loss Br (200,000)
If Aluminum Division is dropped, Br 1,000,000 of the above fixed costs would be eliminated. What will be
the effect on Wroclaw's profit next year if Aluminum Division is dropped instead of being kept?
A. Br 500,000 decrease C. Br 1,000,000 increase
B. Br 800,000 increase D. Br 1,200,000 increase
26) Jordan Company budgeted sales of 400,000 calculators at Br 40 per unit last year. Variable
manufacturing costs were budgeted at Br 16 per unit, and fixed manufacturing costs at Br 10 per unit. A
special order for 40,000 calculators at $23 each was received by Jordan in March. Jordan has sufficient plant
capacity to manufacture the additional quantity without incurring any additional fixed manufacturing costs;
however, the production would have to be done on an overtime basis at an estimated additional cost of Br 3
per calculator. Acceptance of the special order would not affect Jordan's normal sales and no selling
expenses would be incurred. What would be the effect on net operating income if the special order were
accepted?
A. Br 120,000 decrease C. Br 240,000 decrease
B. Br 160,000 increase D. Br 280,000 increase
27) Marley Company makes three products (X, Y,& Z) with the following characteristics:

Product X Y Z
Selling price per unit Br 10 Br 15 Br 20
Variable cost per unit 6 10 10
Machine hours per unit 2 4 10
The company has a capacity of 2,000 machine hours, but there is virtually unlimited demand for each
product. In order to maximize total contribution margin, how many units of each product should the
company produce?

A. 2,000 units of X, 500 units of Y, and 200 units of Z

B. 0 units of X, 0 units of Y, and 200 units of Z
C. 0 units of X, 500 units of Y, and 0 units of Z
D. 1,000 units of X, 0 units of Y, and 0 units of Z
28) Two products, LB and NH, emerge from a joint process. Product LB has been allocated Br 30,800 of the
total joint costs of Br 44,000. A total of 2,000 units of product LB are produced from the joint process. Product
LB can be sold at the split-off point for Br 13 per unit, or it can be processed further for an additional total cost
of Br 14,000 and then sold for Br 15 per unit. If product LB is processed further and sold, what would be the
effect on the overall profit of the company compared with sale in its unprocessed form directly after the split-
off point?
A. Br 16,000 more profit C. Br 40,800 less profit
B. Br 20,800 more profit D. Br 10,000 less profit
29) Teich Inc. is considering whether to continue to make a component or to buy it from an outside supplier.
The company uses 15,000 of the components each year. The unit product cost of the component according
to the company's absorption cost accounting system is given as follows:
Direct materials Br 7.90
Direct labor 2.10
Variable manufacturing overhead 1.10
Fixed manufacturing overhead 4.00
Unit product cost Br 15.10
Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 10% is avoidable if the
component were bought from the outside supplier; the remainder is not avoidable. In addition, making
the component uses 3 minutes on the machine that is the company's current constraint. If the
component were bought, this machine time would be freed up for use on another product that requires 6
minutes on the constraining machine and that has a contribution margin of Br 8.10 per unit. When
deciding whether to make or buy the component, what cost of making the component should be
compared to the price of buying the component?
A. Br 15.55 C. Br 19.15
B. Br 11.50 D. Br 15.10
30) Which of the following is true?
A. Quantities of various products (or services) that constitute total unit sales of a company.
B. There is no unique breakeven number of units for a company producing multiple products.
C. There is unique breakeven number of units for a company producing multiple products.
D. A & B
E. None of the above.
31) Feedback regarding previous actions may affect;
A. Future predictions. C. The decision model.
B. Implementation of the decision. D. All of the above
32) The formal process of choosing between alternatives is known as
A. A relevant model. C. An alternative model.
B. A decision model. D. A prediction model.
33) For decision making, a listing of the relevant costs
A. Will help the decision maker concentrate on the pertinent data.
B. Will only include future costs.
C. Will only include costs that differ among alternatives.
D. Should include all of the above.
34) A computer system installed last year is an example of
A. A sunk cost. C. A differential cost.
B. A relevant cost. D. An avoidable cost.
35) A budget is a plan of action expressed in:
A. Financial terms
B. Non‐financial terms
C. Both A &B
D. Subjective matter
36) The reason why people budget is:
A. Scarcity of economic resources.
B. Periodic planning requires budgeting.
C. To think ahead of time.
D. To satisfy legal and contractual requirements.
37) Which of the following is not a component of mater budget?
A. Operational budget. D. Continuous budget.
B. Long range plan. E. Rolling budget.
C. Financial budget.
38) An Unfavorable variance occurs when:
A. Budgeted revenues exceed Actual revenues
B. Actual costs are less than budgeted costs
C. Actual costs exceed budgeted costs
D. A and B
E. A and C
39) The difference between flexible budget and static budget is known as
A. Static budget variance. C. Flexible budget variance.
B. Sales volume variance. D. Quantity variance.
40) The flexible budget variance for revenues is known as:
A. Price variance C. Flexible budget variance
B. Efficiency variance D. Sales price variance
Use the following information to answer questions 41 to 43
A company has prepared its budget at an expected production and sales volume of 2,000 units for the month of May.
The company is expecting to sell the units for Br.180 per unit. At the end of May the company actually sold 2,200 units at
an actual selling price of Br. 150. The budgeted direct labor and direct material cost per unit are Br.25 and Br.20
respectively.
41) What is the amount of the sales volume variance for the direct materials?
A. 4000U. B. 4000F. C. 5000U. D. 5000F.
42) What is the amount of the sales quantity variance?
A. 30,000F. B. 36,000F. C. 36,000U. D. 30,000U.

43) The sales price variance for the company is

A. 3,300F. B. 6,600F. C. 6,600U. D. 3,300U.
44) Which one of the following is not an operating budget?
A. Cash budget.
B. Direct materials budget
C. Selling and administrative expense budget
D. Production budget.
45) L Company produces hand tools. For March, budgeted sales are 12,000 units, beginning finished goods inventory
will be 1,200 units, and ending finished goods inventory will be 1,400 units. March production will be?
A. 10,900
B. 11,800
C. 12,200
D. 14,600
46) Which of the following is not a major benefit of budget?
A. Compels planning
B. Eliminates innovation
C. Provides performance criteria
D. Promotes coordination and communication
47) All but one of the following is a financial budget
A. Budgeted income statement
B. Cash budget
C. Budgeted balance sheet
D. Capital budgets
E. All except “a”
48) One of the following is not true about flexible budgets
A. It is affected by the volume of an activity level
B. Prepared for ranges of volume of activity levels
C. Provides a dynamic basis for performance evaluation
D. Only prepared after actual operations
E. None of the above
49) one of the following is true about variances
A. All variances ultimately affect operating income
B. If actual is greater than budget, the resulting variance is favorable
C. Favorable variances always indicate good performance
D. Variances arising from different level of efficiency are output variances
E. All of the above
50) The type of budget variance that measures operating performance by comparing an actual cost with budgeted
costs for the actual level of activity is?
A. Sales volume variance
B. Flexible budget variance
C. Static budget variance
D. Price variance

51) Which of the following represents the normal sequence in which the below budgets are
prepared?
[A] Sales, Balance Sheet, Income Statement
[B] Balance Sheet, Sales, Income Statement
[C] Sales, Income Statement, Balance Sheet
[D] Income Statement, Sales, Balance Sheet
52) The budget method that maintains a constant twelve month planning horizon by adding a new
month on the end as the current month is completed is called:
 [A] An operating budget. [C] A continuous budget.
[B] A capital budget. [D] A master budget.
53) All the following are considered to be benefits of participative budgeting, except for:
[A] Individuals at all organizational levels are recognized as being part of a team; this results in greater
support for the organization.
[B] The budget estimates are prepared by those in directly involved in activities.
[C] When managers set their own targets for the budget, top management need not be concerned with
the overall profitability of operations.
[D] Managers are held responsible for reaching their goals and cannot easily shift responsibility by
blaming unrealistic goals set by others
54) Which of the following is NOT an objective of the budgeting process?
[A] To communicate management's plans throughout the entire organization.
[B] To provide a means of allocating resources to those parts of the organization where they can be
used most effectively.
[C] To ensure that the company continues to grow.
[D] To uncover potential bottlenecks before they occur
55) When preparing a production budget, the required production equals:
[A] Budgeted sales + beginning inventory + desired ending inventory.
[B] Budgeted sales - beginning inventory + desired ending inventory.
[C] Budgeted sales - beginning inventory - desired ending inventory.
[D] Budgeted sales + beginning inventory - desired ending inventory
56) Sharp Company, a retailer, plans to sell 15,000 units of Product X during the month of August. If
the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on
hand at the end of the month, how many units of Product X must be purchased from the
supplier during the month?
[A] 14,500 [C] 15,000
[B] 15,500 [D] 17,000
57) A major disadvantage of static budgets is:
[A] The difficulty in developing such budgets due to the high cost of gathering the necessary
information.
[B] The cost behavior pattern of manufacturing overhead, which is primarily fixed.
[C] That the variances between actual and budget on a static budget result from comparing actual
costs at one level of activity to budgeted costs at a different level of activity.
[D] their length and complexity
58) Comparing actual results to a budget based on actual activity for the period is possible with the
use of a:
[A] Monthly budget. [C] Flexible budget.
[B] Master budget. [D] rolling budget
59) A static budget is:
[A] A budget for a single level of activity.
[B] A budget that ignores inflation.
[C] Used only for fixed costs.
[D] Used when the mix of products does not change.
60) Hal Etoesus currently works as the fry guy at Burger Breath Drive Thru but is thinking of
quitting his job to attend college full time next semester. Which of the following would be
considered an opportunity cost in this decision?
[A] the cost of the textbooks
[B] the cost of the cola that Hal will consume during class
[C] Hal's lost wages at Burger Breath
[D] both A and B above
61) In a make-or-buy decision, relevant costs include:
[A] unavoidable fixed costs [B] avoidable fixed costs
[C] fixed factory overhead costs applied to products
[D] fixed selling and administrative expense
62) When a multi-product factory operates at full capacity, decisions must be made about what
products to emphasize. In making such decisions, products should be ranked based on:
[A] selling price per unit [B] contribution margin per unit
[C] contribution margin per unit of the constraining resource
[D] unit sales volume
63) A decision model involves a(n):
[A] informal method of making a choice at the lower level management using sensitivity analysis
[B] formal method of making a choice that often involves both quantitative and qualitative analyses
[C] informal method of making a choice which is discussed in detailed in the financial reports
[D] formal method of making a choice at the lower level management using advanced management
techniques such as balance scorecard
64) Which of the following is NOT true with regards to relevant costs and relevant revenues?
[A] They are sunk costs and historical revenues.
[B] They are expected costs and expected revenues.
[C] They occur in the future.
[D] The differ among alternative courses of action
65) Which of the following statements is true with regards to relevant information?
[A] When judging alternatives, differences between expected future results are relevant to a decision.
[B] Past (historical) costs relevant when making decisions.
[C] All expected future revenues and expected future costs are relevant when making decisions.
[D] A heavier weight should be given to quantitative nonfinancial factors than to qualitative factors.

66) Management is considering two alternatives. Alternative A has projected revenue per year of
$100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000.
Both projects require an initial investment of $250,000 of which $75,000 has already been set
aside and will be used as a down payment on the project that is chosen. There are also other
qualitative factors that management must consider before making a final choice. Which of the
following statements is correct about relevant costs and relevant revenues?
[A] The sunk cost of $75,000 is relevant.
[B] The projected revenues are relevant to the decision.
[C] The initial investment of $250,000, the projected revenues, and the projected costs are all relevant.
[D] The only relevant item are the costs as they differ between alternatives.
67) A relevant revenue is revenue that is a(n):
[A] past revenue that differs among alternative courses of action
[B] future revenue that differs among alternative courses of action
[C] in-hand revenue [D] earned revenue
68) Which of the following is true of special order pricing?
[A] It represents a short-run pricing decision.
[B] The special pricing should not be set below the regular price.
[C] It represents a long-term pricing decision.
[D] The special price should assure that incremental revenue covers fixed costs.
69) When there is an excess capacity, it makes sense to accept a one-time-only special order for
less than the current selling price if
[A] incremental revenues exceed incremental costs
[B] additional fixed costs is incurred to accommodate the order
[C] the company placing the order is in the same market segment as your current customers
 [D] incremental revenue equals incremental operating income
70) Dantley's Furniture manufactures rustic furniture. The cost accounting system estimates
manufacturing costs to be $180 per table, consisting of 80% variable costs and 20% fixed costs.
The company has surplus capacity available. It is Back Forrest's policy to add a 55% markup to
full costs. Dantley's Furniture is invited to bid on a one-time-only special order to supply 120
rustic tables. What is the lowest price Dantley's Furniture should bid on this special order?
[A] $16,200 [B] $17,280 [C] $21,600 [D] $29,160
71. A ETB 2.00 increase in a product's variable expense per unit accompanied by a ETB 2.00 increase in its
selling price per unit will:
[A] Decrease the degree of operating leverage.
[B] Decrease the contribution margin.
[C] Have no effect on the break-even volume.
[D] have no effect on the contribution margin ratio
72. Carver Company produces a product which sells for ETB 40. Variable manufacturing costs are ETB 18
per unit. Fixed manufacturing costs are ETB 5 per unit based on the current level of activity, and fixed
selling and administrative costs are ETB 4 per unit. A selling commission of 15% of the selling price is
paid on each unit sold. The contribution margin per unit is:
[A] ETB 7 [B] ETB 17 [C] ETB 22 [D] ETB 16
73. The contribution margin ratio is equal to:
[A] Total manufacturing expenses/Sales. [C] 1 - (Gross Margin/Sales).
[B] (Sales - Variable expenses)/Sales. [D] 1 - (Contribution Margin/Sales).
74. Tice Company is a medium-sized manufacturer of lamps. During the year a new line called “HOW” was
made available to Tice's customers. The break-even point for sales of HOW is ETB 200,000 with a
contribution margin of 40%. Assuming that the profit for the HOW line during the year amounted to ETB
100,000, total sales during the year would have amounted to:
[A] ETB 300,000 [B] ETB 420,000 [C] ETB 450,000 [D] ETB 475,000
75. Candy Computer sells a product for ETB 10 per unit. The variable expenses are ETB 6 per unit, and the
fixed expenses total ETB 35,000 per period. By how much will net operating income change if sales are
expected to increase by ETB 40,000?
[A] ETB 16,000 increase [C] ETB 24,000 increase
[B] ETB 5,000 increase [D] ETB 11,000 decrease
76. During last year, Azeb Diagnostic Lab supplied hospitals with a comprehensive diagnostic kit for ETB
120. At a volume of 80,000 kits, Azeb had fixed expenses of ETB 1,000,000 and net operating income of
ETB 200,000. Because of an adverse legal decision, Azeb's liability insurance expenses this year will be
ETB 1,200,000 more than they were last year. Assuming that the volume and other costs are unchanged,
what should be the sales price this year if Azeb is to make the same ETB 200,000 net operating income?
[A] ETB 120 [B] ETB 135 [C] ETB 150 [D] ETB 240
77. Which of the following is correct? The break-even point occurs on the CVP graph where:
[A] Total profit equals total expenses.
[B] Total profit equals total fixed expenses.
[C] Total contribution margin equals total fixed expenses
[D] Total variable expenses equal total contribution margin.
78. The contribution margin ratio always increases when the:
[A] Break-even point increases. [B] Break-even point decreases.
[C] Variable expenses as a percentage of net sales decrease.
[D] Variable expenses as a percentage of net sales increase.
79. The Break-even point in unit sales is found by dividing total fixed expenses by:
[A] The contribution margin ratio. [C] The sales price per unit.
[B] The variable expenses per unit. [D] The contribution margin per unit
80. Which of the following would not affect the break-even point?
[A] number of units sold [C] total fixed expenses
[B] variable expense per unit [D] selling price per unit
81. If a company decreases its total fixed expenses while increasing the variable expense per unit, the total
expense line relative to its previous position on a cost-volume-profit graph will:
[A] shift upward and have a steeper slope.
[B] shift upward and have a flatter slope.
[C] shift downward and have a steeper slope.
[D] shift downward and have a flatter slope.
82. A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling
price per unit will:
[A] decrease the degree of operating leverage.
[B] decrease the contribution margin.
[C] have no effect on the break-even volume.
[D] have no effect on the contribution margin ratio.
83. The break-even point in unit sales is found by dividing total fixed expenses by:
[A] the contribution margin ratio.
[B] the variable expenses per unit.
[C] the sales price per unit.
[D] the contribution margin per unit.
84. Salinas Corporation has a degree of operating leverage of 8. This means that a 1% change in sales
dollars at Salinas will generate an 8% change in:
[A] variable expenses.
[B] fixed expenses.
[C] contribution margin.
[D] net operating income.
85. Under absorption costing, fixed manufacturing overhead costs:
[A] are deferred in inventory when production exceeds sales.
[B] are always treated as period costs.
[C] are released from inventory when production exceeds sales.
[D] none of these.
86. Under variable costing:
[A] net operating income will tend to move up and down in response to changes in
[B] levels of production.
[C] inventory costs will be lower than under absorption costing.
[D] net operating income will tend to vary inversely with production changes.
[E] net operating income will always be higher than under absorption costing.
87. When production exceeds sales, the net operating income reported under absorption
[A] costing generally will be:
[B] less than net operating income reported under variable costing.
[C] greater than net operating income reported under variable costing.
[D] equal to net operating income reported under variable costing.
[E] higher or lower because no generalization can be made.
88. When using a flexible budget, what will occur to fixed costs as the activity level increases within the
relevant range?
[A] fixed costs per unit will decrease.
[B] fixed costs per unit will remain unchanged.
[C] Fixed costs per unit will increase.
[D] Fixed costs are not considered in flexible budgeting
89. Comparing actual results to a budget based on actual activity for the period is possible with the use of a:
[A] Monthly budget.
[B] Master budget.
 [C] Flexible budget.
[D] rolling budget
90. In a standard cost system, overhead is applied to production on the basis of:
[A] the denominator hours chosen for the period.
[B] the actual hours required to complete the output of the period.
[C] the standard hours allowed to complete the output of the period.
[D] none of these.

91. A fixed overhead volume variance based on standard direct labor-hours measures:
[A] deviation from standard direct labor hour capacity.
[B] deviation from the denominator level of direct labor hours.
[C] fixed overhead efficiency.
[D] fixed overhead spending.
91. Mcgahen Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of
activity was 1,080 patient-visits and the actual level of activity was 990 patient-visits. The clinic's director
budgets for variable overhead costs of $3.30 per patient-visit and fixed overhead costs of $10,600 per month.
The actual variable overhead cost last month was $3,380 and the actual fixed overhead cost was $8,780. In
the clinic's flexible budget performance report for last month, what would have been the variance for the total
overhead cost?
[A] $113 U
[B] $297 F
[C] $1,707 F
[D] $2,004 F

92. Sesareo Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month,
the budgeted level of activity was 1,130 square feet and the actual level of activity was 1,180 square feet.
The company's owner budgets for supply costs, a variable overhead cost, at $2.60 per square foot. The
actual supply cost last month was $2,130. In the company's flexible budget performance report for last month,
what would have been the variance for supply costs?
[A] $808 F
[B] $938 F
[C] $90 U
[D] $130 U
93. Which of the following statements concerning ideal standards is incorrect?
[A] Ideal standards generally do not provide the best motivation for workers.
[B] Ideal standards do not make allowances for waste, spoilage, and machine breakdowns.
[C] Ideal standards are better suited for cash budgeting than practical standards.
[D] Ideal standards may be better than practical standards when managers seek continual improvement.
94. When computing standard cost variances, the difference between actual and standard price multiplied by
actual quantity yields a(n):
[A] Combined price and quantity variance.
[B] Efficiency variance.
[C] Price variance.
[D] Quantity variance.
95. When the actual price paid on credit for a raw material exceeds its standard price, the journal entry would
include:
[A] Debit to Raw Materials; Credit to Materials Price Variance
 [B] Debit to Accounts Payable; Credit to Materials Price Variance
[C] Debit to Raw Materials; Debit to Materials Price Variance
[D] Debit to Accounts Payable; Debit to Materials Price Variance

96. When the actual price paid on credit for a raw material is less than its standard price, the journal entry
would include:
[A] Credit to Raw Materials; Credit to Materials Price Variance
[B] Credit to Accounts Payable; Credit to Materials Price Variance
[C] Credit to Raw Materials; Debit to Materials Price Variance
[D] Credit to Accounts Payable; Debit to Materials Price Variance
97. When the actual amount of a raw material used in production is less than the standard amount allowed
for the actual output, the journal entry would include:
[A] Credit to Raw Materials; Credit to Materials Quantity Variance
[B] Credit to Work-In-Process; Credit to Materials Quantity Variance
[C] Credit to Raw Materials; Debit to Materials Quantity Variance
[D] Credit to Work-In-Process; Debit to Materials Quantity Variance
98. Which of the following would produce a materials price variance?
[A] An excess quantity of materials used.
[B] An excess number of direct labor-hours worked in completing a job.
[C] Shipping materials to the plant by air freight rather than by truck.
[D] Breakage of materials in production.
99. A labor efficiency debit balance indicates that:
[A] The wage rate paid to production workers was less the standard.
[B] The wage rate paid to production workers was above the standard.
[C] Less labor time was spent on production than was called for by the standard.
[D] More labor time was spent on production than was called for by the standard.
100. Kahn Company produces and sells 8,000 units of Product X each year. Each unit of Product X
sells for $10 and has a contribution margin of $6. It is estimated that if Product X is discontinued, $50,000
of the $60,000 in fixed costs charged to Product X could be eliminated. These data indicate that if
Product X is discontinued, overall company net operating income should:
[A] increase by $2,000 per year
[B] decrease by $2,000 per year
[C] increase by $38,000 per year
[D] decrease by $38,000 per year