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| 1 | |
In activity-based budgeting, the sequence for formulating the budget differs from a conventional budgeting system. What is this sequence? |
| | A) | Determine both sale and production volumes, determine the demand for activities and then calculate the resources required to undertake the activities. |
| | B) | Calculate the resources required to undertake the activities, determine the demand for the activities and then determine the sales and production volumes. |
| | C) | Calculate the resources required to undertake the activities, determine the sales and production volumes and then determine the demand for activities. |
| | D) | Determine the sales and production volumes, calculate the resources required to undertake the activities and then determine the demand for activities. |
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| 2 | |
Why would estimating the budgeted resources through the reversal process be ‘hopelessly inaccurate’ (Cooper and Slagmulder 2000a, 2000b)? |
| | A) | Spending versus consumption of resources: The cost of unused capacity is not included in ABC product costs because activity-based budgeting assumes that the resources consumed equals the resources acquired. |
| | B) | Non-manufacturing activities: The calculation of product costs under ABC may include the cost of activities that occur in non-manufacturing areas. In activity-based budgeting, if the demand for the product increases by 20% then it is assumed that the cost of the non-manufacturing costs would also increase by 20%. This may not be a correct assumption regarding the cost behaviour of the non-manufacturing costs. |
| | C) | Information requirements: Complexities of the ABC and ABB may cause inaccuracies to occur and be overlooked. |
| | D) | All of the given answers. |
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| 3 | |
Flexible budgets are used in non-manufacturing organisations such as hospitals, hotels and restaurants to: |
| | A) | control direct material costs |
| | B) | control direct labour costs |
| | C) | control overhead costs |
| | D) | price services |
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| 4 | |
When calculating the unit standard cost for a particular input, an organisation must make a decision regarding which of the following? |
| | A) | The amount of input that should be used per unit of output and the amount of output that should be manufactured. |
| | B) | The amount of output that should be manufactured and the amount that should be paid for each unit manufactured. |
| | C) | The amount that should be paid for the quantity of input required and the amount of input that should be purchased. |
| | D) | The amount of input that should be used per unit of output and the amount that should be paid for the quantity of the input to be used. |
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| 5 | |
An unfavourable variable overhead spending variance may be interpreted as meaning which of the following? |
| | A) | Manufacturing staff used more kilowatt hours of electricity than allowed for in the budget. |
| | B) | The actual price of electricity per kilowatt hour was higher than that allowed for in the budget. |
| | C) | Manufacturing staff used excess quantities of factory supplies, such as litres of lubricants, when compared with the budgeted quantities. |
| | D) | All of the given answers. |
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| 6 | |
The Oakleigh Company has the following information available for its production facility for the month of July. The budgeted activity level for fixed manufacturing overhead was estimated to be 48 000 machine hours for the production cycle. Actual machine hours for the period were 50 000, which resulted in the completion of 9900 units. Material purchased (210 000 items) | $819 000 | Material quantity variance | $39 600 U | Actual labour cost (15 000 hours) | $102 000 | Machine hours used | 50 000 machine hours | Variable overhead spending variance | $2 500 U | Actual fixed manufacturing overhead | $150 000 |
Oakleigh’s standard costs per unit are as follows: Direct material | 20 components @ $4 per item | Direct labour | 1.5 hours @ $6 per hour | Variable overhead (applied on machine hour basis) | 4.8 hours @ $2.50 per hour | Fixed overhead (applied on machine hour basis) | 4.8 hours @ $3 per hour |
The fixed overhead volume variance is calculated as $1440 unfavourable; what does this variance mean?
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| | A) | An unfavourable fixed overhead volume variance means that the standard hours allowed for actual output are greater than that allowed for planned level of production. |
| | B) | An unfavourable fixed overhead volume variance means that the standard hours allowed for actual output are less than that allowed for the planned level of production. |
| | C) | An unfavourable fixed overhead volume variance means that actual fixed overhead was greater than the budgeted fixed overhead. |
| | D) | An unfavourable fixed overhead volume variance means that actual fixed overhead was less than the budgeted fixed overhead. |
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| 7 | |
The correct interpretation of a fixed overhead volume variance is that: |
| | A) | the actual spending on fixed overhead items is higher or lower than budgeted fixed overhead |
| | B) | the actual price and usage of fixed overhead items is higher or lower than applied fixed overhead |
| | C) | the actual price and usage of fixed overhead items are higher or lower than the applied overhead |
| | D) | the fixed overhead volume variance provides a way of reconciling the two purposes of costing systems: product costing and cost control. |
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| 8 | |
Which of the following variances has a common, but faulty, interpretation that it is a measurement of the cost of underutilising productive capacity? |
| | A) | Unfavourable variable overhead spending variance. |
| | B) | Favourable variable overhead spending variance. |
| | C) | Unfavourable fixed overhead budget variance. |
| | D) | Unfavourable fixed overhead volume variance. |
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| 9 | |
If actual fixed overhead was $130 000, there was a $3000 favourable fixed overhead budget variance and a $5 000 unfavourable fixed overhead volume variance, budgeted fixed overhead must have been: |
| | A) | $127 000 |
| | B) | $133 000 |
| | C) | $135 000 |
| | D) | $125 000 |
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| 10 | |
Fixed overhead was budgeted at $300 000 and direct labour hours were budgeted at 15 000. If the fixed overhead volume variance was $20 000 favourable and the fixed overhead budget variance was $24 000 unfavourable, the fixed overhead applied must be: |
| | A) | $280 000 |
| | B) | $320 000 |
| | C) | $276 000 |
| | D) | $304 000 |
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