accounts data bank

Question # 00004125 Posted By: spqr Updated on: 11/25/2013 09:17 PM Due on: 11/30/2013
Subject Accounting Topic Accounting Tutorials:
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Chapter 15

Planning and control: budgeting

1.Which of the following is not an essential feature of a budget?

(a) There is a clearly defined budget period.

(b) It is a combination of financial and non-financial data set by reference to key budget


(c) It permits managers flexibility in terms of the policies that should be pursued to meet corporate


(d) It has been formally approved and accepted as realistic by managers.

2.Amaster budget comprises:

(a) A budgeted balance sheet.

(b) A budgeted balance sheet and profit and loss account.

(c) A budgeted balance sheet, profit and loss account and cash flow statement.

(d) A budgeted balance sheet, profit and loss account, cash flow statement based upon coordinated

departmental operating budgets.

3.A flexible budget is:

(a) One where departmental functional managers are given discretion over the application of

spending limits.

(b) One where the budget is permitted to alter to reflect changes in activity levels.

(c) One where managers are given discretion as to the investigations which are carried out into

variances revealed by budgetary control reports.

(d) One which allows departmental managers to design their own budgetary control reports.

4. In a manufacturing company, which of the budgets will normally be prepared first in the budget

preparation cycle?

(a) The stock budget.

(b) The production budget.

(c) The cash flow forecast.

(d) The sales budget.

5.The administration of the budget process in a large organization is normally the responsibility of:

(a) The board of directors.

(b) The audit committee.

(c) The chief executive.

(d) A budget committee working in conjunction with the finance function.

6.Which of the following statements is valid:

(a) The Budget Committee should set the budgets for cost centre managers.

(b) Cost centre managers should prepare their own budgets.

(c) Management accountants should prepare budgets for cost centre managers.

(d) Senior management should prepare cost centre budgets.

Chapter 16

Planning and control: standard costing

1.A standard cost which will be most useful for control purposes is one which:

(a) Contains no allowances for normal losses or other forms of wastage.

(b) Is set in advance of the control period and which then remains unchanged.

(c) Contains a reasonable degree of allowances for operating inefficiencies.

(d) Managers are expected to achieve at all times.

2.Direct material total variances can be analysed into:

(a) Efficiency and price variances.

(b) Price and productivity variances.

(c) Price and usage variances.

(d) Efficiency and usage variances.

3.XYZ Ltd uses standard costing.Variance analysis has revealed an adverse total direct material variance

at the end of an operating period.Which of the following combinations of factors is the most

likely reason for the adverse variance?

(a) Price reductions and lower wastage.

(b) Price increases and greater wastage.

(c) Employing less skilled workers to lower labour costs.

(d) Over estimation of the material cost built into the standard cost.

4.Which of the following statements would be a valid explanation of a favourable direct labour rate


(a) The standard cost overestimated a national wage agreement settlement for the production

operatives in the factory.

(b) The standard labour time per unit was overstated as it failed to incorporate production efficiencies

made possible by new machinery.

(c) There was a cost saving as a result of a strike in the factory during the year.

(d) The standard cost did not take into account changes in the product specification which meant

that in practice, less time per unit was needed for assembly.

Chapter 17

Decision making: contribution analysis

1.A variable cost is?

(a) One which varies in proportion to the level of fixed cost incurred.

(b) One which tends to vary with the level of activity.

(c) One which changes over time.

(d) One which cannot be estimated with any great degree of accuracy.

2.The term ‘contribution’ refers to?

(a) The actual amount of profit made per unit.

(b) The budgeted profit per unit.

(c) The amount of profit which goes towards meeting the overheads of the business.

(d) The difference between sales revenue and variable costs per unit.

3.The break-even point is that at which:

(a) The level of activity at which the business operates most economically.

(b) The level of activity at which the business makes neither a profit nor a loss.

(c) The fixed costs are lowest.

(d) The variable cost per unit is minimized.

4.When a business is faced with a limiting factor (one which limits the activity of an entity) and there

is a choice to be made between options to follow, which of the following statements describes the

optimal course of action?

(a) Choose the option which gives the highest unit profit.

(b) Choose the option which gives the highest unit contribution.

(c) Aim to achieve a balance of activities covering all of the options.

(d) Choose the option which gives highest contribution per unit of limiting factor.

5.XYZ Ltd has the following alternative planned activity levels:

Level A Level B Level C

Total costs £100 000 £150 000 £200 000

Number of units produced 5 000 10 000 15 000

(Fixed overhead remains constant over the activity range shown.)

The fixed overhead cost per unit is:

(a) £20.

(b) £15.

(c) £13.33.

(d) £10.

6.Which of the following statements regarding marginal costing is incorrect?

(a) It is a useful long-term planning technique.

(b) It assumes that fixed costs remain fixed over relevant activity ranges.

(c) It assumes that other costs vary in proportion to activity.

(d) It assumes that costs can be classified as variable or fixed.

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