Accounting for Decision Making

Quiz 2
Time: 45 Minutes
1. The first step in the budgeting process is the preparation of the:
2. One of the following is usually prepared before the direct materials purchases budget:
3. What is the total fixed cost of the shipping department of EZ-Mail Clothing Co. if it has the
following information for 2008?
4. The three categories of inventories commonly found in many manufacturing companies are
5. All of the cost categories listed below are usually found in a company's accounting records,
except for:
6. Which of the following steps in the preparation of a master budget would logically be
performed last?
7. Which of the following costs would be considered a period rather than a product cost in a
manufacturing company?
8. If your inventory balance at the beginning of the month was Rs1,000, you bought Rs100
during the month, and sold Rs300 during the month, what would be the balance at the end of
the month?
9. Direct materials used in production totaled Rs280,000. Direct labor was Rs375,000 and
factory overhead was Rs180,000. What were total manufacturing costs incurred for the
month?
10. Beginning work in process was Rs125,000. Manufacturing costs incurred for the month
were Rs835,000. There were Rs200,000 of partially finished goods remaining in work in
process inventory at the end of the month. What was the cost of goods manufactured during
the month?
11. Beginning finished goods inventory was Rs130,000. The cost of goods manufactured for the
month was Rs760,000. And the ending finished goods inventory was Rs150,000. What was
the cost of goods sold for the month?
12. Suppose you are trying to decide whether to drive or take the train to Lahore to attend a
marriage of a distant relative. You have ample cash to do either, but you dont want to waste
money needlessly. Is the cost of the train ticket relevant in this decision?
13. Suppose you are trying to decide whether to drive or take the train to Hyderabad to attend a
concert. You have ample cash to do either, but you dont want to waste money needlessly. Is
the annual cost of taxes paid for your car relevant in this decision?
14. Suppose that your car could be sold now for Rs5,000. Is this a sunk cost?

15. When the level of activity decreases within the relevant range, the fixed cost per unit will:
16. A Sunk Cost is;
17. The primary focus of cost management is to
18. Which of the following is an example of a period cost?
19. The distinction between indirect and direct costs depends on:
20. The one cost that would be classified as part of both prime cost and conversion cost would
be:
21. In an income statement prepared as an internal report using the variable costing method,
variable selling and administrative expenses would:
22. If the number of units produced exceeds the number of units sold, then net operating income
under absorption costing will:
23. Which of the following costs incurred by a holiday tour operator can be classified as
variable?
24. Product cost under absorption costing is characteristically:
25. When production is equal to sales, which of the following is true?
26. Advantages of variable costing include which of the following?
27. A company has forecast sales in the first 3 months of the year as follows (figures in millions):
January, Rs60; February, Rs80; March, Rs100. 60% of sales are usually paid for in the month
that they take place and 40% in the following month. Receivables at the end of December
were Rs24 million.
28.
1. Which of the following would likely be the most appropriate cost driver of machinery power
costs?
29. Using absorption costing, a unit of product includes what costs?
30. Using variable costing, a unit of product includes which costs?
31. Given the cost formula Y = Rs30,000 + Rs5X, total cost at an activity level of 16,000 units
would be

32. An analysis of past maintenance costs indicates that maintenance cost is an average of
Rs0.40 per machine-hour at an activity level of 20,000 machine-hours and Rs0.50 per
machine-hour at an activity level of 16,000 machine-hours. What is the total expected
maintenance cost if the activity level is 18,500 machine-hours?
33. ________details the planned expenditures for facilities, equipment, new products, and other
long-term investments.
34. The
summarizes the planned activities of all subunits of an organization - sales,
production, distribution, and finance - and is the periodic business plan that includes a
coordinated set of detailed operating schedules and financial statements.
35. The
includes the sales budget, purchases budget, cost of goods sold budget,
operating expenses budget, and budgeted income statement, while
the
includes
the capital budget, cash budget, and the budgeted balance sheet.
36. _______ is another term for forecasted financial statements.
37. In order for budgets to be helpful in assisting an organization to accomplish its objectives
38. The cash budget is the primary short-run financial planning tool. The key reasons a cash
budget is created are:
39. Root Company sells a product for Rs35. Budgeted sales for the first quarter of 2002 are as
follows:
January
Rs600,000
February
300,000
March
900,000
The company collects 70% in the month of sale and 25% in the following month. Five percent
of all sales are uncollectible and are written off.
40. Projected sales for Joshua, Inc., for next year and beginning and ending inventory data:
Sales
60,000 units
Beginning Inventory
12,000 units
Targeted Ending. Inv. 30,000 units
The selling price is Rs20 per unit. Each unit requires 4 pounds of material, which costs Rs5 per
pound. The beginning inventory of raw materials is 7,000 pounds. The company wants to have
6,800 pounds of material in inventory at the end of the year.
41. Projected sales for Frances Company for the next month and beginning and ending inventory
data are as follows:
Sales
40,000 units
Beginning inventory
3,000 units
Targeted ending inventory
7,000 units

The selling price is Rs20 per unit. Each unit requires 4 pounds of material, which costs Rs5 per
pound. The beginning inventory of raw material is 15,000 pounds. The company wants to have
20,000 pounds of material in inventory at the end of the month.
42. Given the information below
Direct materials inventory, 1/1
Direct materials inventory, 12/31
Direct materials budgeted for use during year
Accounts payable to suppliers, 1/1
Accounts payable to suppliers, 12/31

Rs 104,000
128,000
400,000
80,000
120,000

43. Variable costing is also known as:

44. Expense #1 is a fixed cost; expense #2 is a variable cost. During the current year, the activity
level has increased, In terms of cost per unit of activity, we would expect that:
45. Which costs will change with an increase in activity?