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Accounting 329 Spring, 2004 Exam #3 Name _________________________ PLEASE NOTE: This exam covers Chapters 8, 9, and 20. Multiple choice questions 7,

accounting exam sample

Accounting 329 Name _________________________ Spring, 2004 Exam #3 PLEASE NOTE: This exam covers Chapters 8, 9, and 20. Multiple choice questions 7, 8, and 9, and problem #4 cover material from Chapter 20, which will be included on the summer 2005 Exam #4. I. MULTIPLE CHOICE 1. Which of the following is NOT considered to be a benefit of participative budgeting? a. Individuals at all organizational levels are recognized as being part of the team; this results in greater support of the organization. b. The budget estimates are prepared by those in direct contact with variance activities. c. Managers are held responsible for reaching their goals, and they cannot shift their responsibility by blaming the unrealistic goals demanded by the budget. d. When managers set the final targets for the budget, top management need not be concerned with the overall profitability of current operations. e. none of the above 2. A disadvantage of participatory budgets is that a. there is a high degree of acceptance of the goals and objectives by operating management. b. they are usually more realistic. c. they lead to better morale and higher motivation. d. they usually require more time to prepare. e. none of the above 3. Operating budgets are a. a forecast of expected operating expenses. b. a forecast of units of production. c. concerned with the income-generating activities of a firm. d. concerned with the inflows and outflows of cash. e. none of the above 4. Which of the following statements concerning standard costs is true? a. Standard costs are estimates of costs attainable only under the most ideal conditions, but are rarely practicable. b. Standard costs are difficult to use with a process costing system. c. If properly used, standards can help motivate employees. d. Unfavorable variances, material in amount, should be investigated, but large favorable variances need not be investigated. e. none of the above 5. A company uses direct labor hours to apply overhead to production. A production volume variance will exist in a period when a. production volume differs from sales volume. b. actual direct labor hours differ from standard allowed direct labor hours. c. the fixed factory overhead applied on the basis of standard allowed direct labor hours differs from actual fixed factory overhead.
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d. the fixed factory overhead applied on the basis of standard allowed direct labor hours differs from the budgeted fixed factory overhead. e. none of the above 6. Assume price variances are recorded at the time of purchase. What is the journal entry to record a direct materials price variance if materials are purchased at $5 per unit for $650 and their standard cost is $4 per unit? a. Inventory 650 Accounts payable 650 b. Inventory 520 DM price variance 130 Accounts payable 650 c. Inventory 520 Work in process 130 Cash 650 d. Finished goods 520 DM price variance 130 Cash 650 7. Cost volume profit (CVP) analysis allows management to determine the relative profitability of a product by a. highlighting potential bottlenecks in the production process. b. keeping fixed costs to an absolute minimum. c. determining the contribution margin per unit and the projected profits at various levels of production. d. assigning costs to a production in a manner that maximizes the contribution margin. e. none of the above 8. When an organization is operating above the breakeven point, the degree or amount that revenues may decline before losses are incurred is the a. residual income rate. b. marginal rate of return. c. margin of safety. d. target (hurdle) rate of return. e. none of the above 9. Which of the following would decrease unit contribution margin the most? a. a 15% decrease in selling price b. a 15% increase in variable costs c. a 15% decrease in variable costs d. a 15% decrease in fixed costs II. PROBLEMS 1. BUDGETING
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