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Final Cost II

The document contains a true/false quiz with 10 questions about budgeting concepts and a multiple choice quiz with 15 questions about costing and budgeting topics. It also includes 3 word problems to work through related to variances, special orders, and cost-volume-profit analysis.

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Nigus Ayele
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314 views4 pages

Final Cost II

The document contains a true/false quiz with 10 questions about budgeting concepts and a multiple choice quiz with 15 questions about costing and budgeting topics. It also includes 3 word problems to work through related to variances, special orders, and cost-volume-profit analysis.

Uploaded by

Nigus Ayele
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Part I: True or False.

Write true if the statement is correct or write False if the statement is

incorrect on the answer sheet .


1. Revenue mix is the relative combination of quantities of products or services that constitutes total
revenues.
2. Costs that can be eliminated (in whole or in part) by choosing one alternative over another are
unavoidable costs.
3. For revenue items, favorable variance means actual revenues less than budgeted revenues.
4. The higher margin of safety gives to company a confidence unlikely to suffer a loss.
5. Accepting or rejecting special orders when there is idle production capacity and the special orders
have long-run implications.
6. Flexible budget uses actual output levels instead of budgeted output levels.
7. Decentralization is the price one subunit (segment, department, division, and so on) of an
organization charges for a product or service supplied to another subunits of the same
organization.
8. The direct labor budget is based on the budgeted sales levels.
9. Transfer pricing is the practice of delegating decision making authority to the lower level.
10. Historical cost may be helpful as a basis for making decision, however, it’s always relevant when
making decision.
Part II: Multiple Choices. Instruction: Read the questions and choose the right answer from
the given choices (alternatives) and write the letter of your choice on the space provided at
the separate answer sheet.

1. Budget variance is:


A. The difference between actual fixed overhead costs and overhead costs incurred at the standard
level of activity.
B. The difference between budgeted fixed overhead costs and overhead costs incurred at the
standard level of activity.
C. Favorable if the company operates at an activity level greater than planned for the period
D. Unfavorable if actual fixed overhead costs are greater than budgeted fixed overhead costs
2. The contribution to operating income that is forgone by not using a limited resource in its next-best
alternative use
A. Relevant cost B. Opportunity costs C. Historical cost D. Sunk costs
3. ABC Company is preparing budgets for the quarter ending June 30. The budgeted sales for the next
five months are; April, 20,000 units, May, 50,000 units, June, 30,000 units, July, 25,000 units,
August, 15,000 units. The selling price is Br 10 per unit. The sales budgets for the quarter is
A. Br 200,000 B. Br 400,000 C. Br 800,000 D. Br 1,000,000
4. Based on question number 3, ABC Company wants ending inventory to be equal to 10% of the
following months budgeted sales in units. On March 31, 4,000 units were on hand. The production
budget for the month of April is
A. 46,000 units B. 26,000 units C. 29,000 units D. 101,000 units
5. What is the primary difference between a static budget and a flexible budget?
A. The static budget contains only fixed costs, while the flexible budget contains only variable costs.
B. The static budget is adjusted for different activity levels, while a flexible budget is prepared for a
single level of activity.
C. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for
different activity levels.
D. Both the static budget and the flexible budget are adjusted for different activity levels.
6. Per unit variable cost
A. Increase as volume increase within the relevant range
B. Decrease as volume increase within the relevant range
C. Remain constant within the relevant range
D. Decrease if the volume increase beyond the relevant range
7. Which one of the following are not correct about cost volume profit analysis
A. Change in sales volume are the sole cause for cost and revenues change.
B. Total costs consists of fixed costs and variable costs.
C. Revenue and cost cannot be graphed as a linear function.
D. Selling price, variable cost per unit and fixed cost are all known and constant.
8. Which of the following is not true about the master budget?
A. It is composed of many interrelated budgets
B. It consists of operating budgets and financial budgets
C. Within the master budget the first budget to be prepared is the production budgets
D. It constitute a plan of action for a specified period of time.
Use the following information to answer question number 9-13
Emma sells pens at a selling price of Br 200 and incurs a fixed costs of Br 2,000 and the variable cost
are Br 120 per unit. The income tax rate is 40%.
9. How many is the breakeven quantity?
A. 35 units B. 30 units C. 20 units D. 25 units
10. How many is the breakeven revenue?
A. Br 4000 B. Br 960 C. Br 5000 D. Br 8000
11. What is the target operating income for a year?
A. Br 1500 B. Br 1600 C. Br 1700 D. Br 1400
12. What is the contribution margin for a year?
A. Br 3200 B. Br 960 C. Br 1200 D. Br 8000
13. How many is the target net income?
A. Br 3200 B. Br 960 C. Br 1200 D. Br 8000
14. The difference between budgeted contribution margin for actual sales mix and budgeted sales mix is
called
A. Sales quantity variance B. Cost mix variance C. Volume mix variance D. Sales mix variance
15. If the budgeted contribution margin for budgeted and actual sales mix are Br 35000 and Br 27000,
then the sales mix variance will be
A. Br8,000 B. Br80,000 C. Br62,000 D. Br35,000.
Part III-Workouts Items: You are required to provide clear and neat answer on the attached
paper.

1. Xyz company is a manufacturing company that sale Jackets. The number of units manufactured is the
cost driver for direct materials, direct manufacturing labor and variable manufacturing overhead.
Budgeted fixed cost for production between 0 and 12,000 jackets is $276,000. The actual TFC is
$285,000. The following information has taken from the company’s record keeping office (for the
month of April 2011):

Budgeted Actual

Unit production and sales 12,000 jackets 10,000 jackets

Selling price $120/jacket $125/jacket

Direct material cost $60/jacket $62.5/jacket

Direct manufacturing labor cost $16/jacket $19.8/jacket

Variable manufacturing overhead cost $12/jacket $13.05/jacket

Required
A. Prepare a performance report that uses a flexible budget and a static budget.
B. Calculate the price, efficiency variances for direct materials and direct manufacturing labour.
2. ABC Company receives a one-time order that is not considered part of its normal ongoing business.
ABC Company only produces one type of silver key chain with a unit variable cost of Br 16. Normal
selling price is Br 40 per unit. A company in KKTC offers to purchase 3,000 units for Br 20 per unit.
Annual capacity is 10,000 units, and annual fixed costs total Br 78,000, but ABC Company is
currently producing and selling only 5,000 units. Should the company accept or reject the supplier’s
offer?

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