Introduction to Managerial Accounting Canadian 5th Edition By Brewer – Test Bank

Introduction to Managerial Accounting Canadian 5th Edition By Brewer – Test Bank

Chapter 07

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is not a benefit of budgeting? 1)
A) It provides benchmarks for evaluating subsequent performance.
B) It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts.
C) It ensures that accounting records comply with generally accepted accounting principles.
D) It uncovers potential bottlenecks before they occur.
Answer: C
Explanation: A)
B)
C)
D)
2) ABC Company has a cash balance of $9,000 on April 1. The company must maintain a 2) minimum cash balance of $6,000. During April expected cash receipts are $45,000. Expected cash disbursements during the month total $52,000. During April the company will need to borrow:
A) $8,000. B) $4,000. C) $6,000. D) $2,000.
Answer: B
Explanation: A)
B)
C)
D)

Reference: 07-09
Noel Enterprises has budgeted sales in units for the next five months as follows:
January 6 ,800 units
February 5 ,400 units
March 7 ,200 units
April 4 ,600 units
May 3 ,800 units
Past experience has shown that the ending inventory for each month must be equal to 10% of the next month’s sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.
3) The opening inventory in units for April is: 3)
A) 380. B) 720. C) 460. D) 4,600.

Answer: C
Explanation: A)
B)
C)
D)
4) In completing the Ending Finished Goods Inventory Budget, the managers of Jimbob Co. 4) have determined that there should be 5,000 units of finished goods inventory on hand at the end of the budgeted period. In preparing other budgets they have used the following estimates of quantities and costs required to complete one unit:
Quantity Cost

Direct materials 10.0 kilograms $ 1.00 per kilogram
Direct labour .50 hours $ 20.00 per hour
Manufacturing overhead is allocated at the rate of $5.00 per direct labour hour. Using the above data, the ending finished goods inventory should be:
A) $150,000. B) $112,500. C) $200,000. D) $100,000.
Answer: B
Explanation: A)
B)
C)
D)

Reference: 07-08
Roberts Enterprises has budgeted sales in units for the next five months as follows:
June 4 ,500 units
July 7 ,100 units
August 5 ,300 units
September 6 ,700 units
October 3 ,700 units
Past experience has shown that the ending inventory for each month must be equal to 10% of the next month’s sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year.
5) The opening inventory in units for September is: 5)
A) 6,700. B) 530. C) 370. D) 670.

Answer: D
Explanation: A)
B)
C)
D)

Reference: 07-10
The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3 hours of labour at a labour rate of $9.10 per hour. LFM Company needs to prepare a Direct Labour Budget for the second quarter of next year.
6) The company has budgeted to produce 25,000 units of Product T in June. The finished 6) goods inventories on June 1 and June 30 were budgeted at 500 and 700 units, respectively. Budgeted direct labour costs incurred in June would be:

A) $227,500. B) $295,750. C) $293,384. D) $304,031.
Answer: B
Explanation: A)
B)
C)
D)