1.

#MC# Which of the following statements is true for budgeting?

x Establishing plans and actions; a system of resource allocation; and a base of risk
identification, operational coordination and business performance measurement and
evaluation as well.
Determining resources and how to use the resources in a firm’s production and business
activities in each period
Determining the revenues, expenses and operating profits of a firm in each period
Determining the cash inflow and cash outflow of a firm in each period

2.
#MC# Johnny Company, a retailer, is preparing budgets for the year ended December 20x1.
Budgeted sales volumes for the first 8 months of the year are as follows:
Month Sales volume Month Sales volume
(units) (units)
January 2,000 May 0.5x7,000
February 3,000 June 8,000
March 0.5x5,000 July 9,000
April 0.3x6,000 August 10,000
All sales are on account with 50% collected in the month of sale, 30% collected in the
month following sale and 20% collected in the next month following sale. The unit
selling price is estimated to be $2,000 during the year. Which of the following statements
is true?
Expected cash collection in March will be $5,000,000
Expected cash collection in April will be $9,000,000
x Expected cash collection in May will be $12,600,000
Expected cash collection in June will be $12,200,000

3.
#MC# Miller Corporation, a manufacturer, is preparing budgets for the year ended December
20x1. Budgeted sales volumes for the first 8 months of the year are as follows:
Month Sales volume Month Sales volume
(units) (units)
January 2,000 May 7,000
February 3,000 June 8,000
March 5,000 July 9,000
April 6,000 August 10,000

The management at Miller wants finished goods inventory at the end of each month to be
equal to 10% of the following month’s budgeted sales volume. Which of the following
statements is true?
Finished goods inventory at the beginning and ending of the second quarter are 2,100
units and 2,400 units respectively
x The number of units need to be produced in April is 6,100 units (6000+700-600)
The number of units need to be produced in May is 7,800 units
The number of units need to be produced in June is 8,900 units

4.
#MC# Wonderland Corporation manufactures a single product and has budgeted production
volume of this product over the next 6 months as follows:
Month Production Month Production
volume (units) volume (units)
March 2,100 June 5,100
April 3,100 July 6,100
May 4,100 August 7,100
Standard direct material cost is 5 kgs/unit x $20/kg. Past experience has shown that
materials on hand at the end of each month equal to 10% of materials required for the
following month’s production. Which of the following calculation is true?
 x Materials on hand at the beginning of the second quarter is 6,150 kgs
Materials on hand at the ending of the second quarter is 7,650 kgs
Materials need to be purchased in the second quarter is 61,500 kgs.
Materials need to be purchased in the second quarter is 63,000 kgs.

5.
#MC# Sandy Corporation is preparing the budgeted revenues and costs for the year ended
December 20x2 as follows:

Month Revenues ($) Costs ($)

March 5,000,000 2,000,000
April 7,000,000 3,000,000
May 6,000,000 5,000,000
June 8,000,000 6,000,000
All sales are on account with 30% collected in the month of sale and 70% collected in the
month following sale.
The cost incurred in a month has the cash outflow in the month and the next month is
60% and 20% respectively.
Assume that the company does not have any cash at the beginning of a month. Choose the
correct answer:
Expected cash collection in May is $4,900,000
Expected cash disbursement in May is $3,000,000
Total cash excess in May is $1,900,000
Total cash excess in May is $3,100,000

6.
#MC# Which of the following statements shows the difference between a flexible budget and a
static budget?
Differences in resources estimated to use for production and business activities
Differences in standard cost used to estimate total production and operating costs
Differences in the approach to estimate the operating profit
x Differences in the level of activities used to estimate resources, costs and operating profits

7.
#MC# Henry Company uses a standard cost system to plan and control the production cost of
product X in June. The standard direct materials cost for each unit of product X is
$200/unit (8 kgs/unit *$25/kg). The estimated production volume for the month is 80,000
units. In June, Henry Company bought and used 350,000 kgs of materials with a purchase
price of $28/kg to produce 70,000 units. Which of the following statements is correct?
Activity variance for direct material costs is $2,000,000 (adverse)
Spending variance for direct material costs is $4,200,000 (adverse)
Total direct material cost variance (actual costs versus static budgeted costs) is
$6,200,000 (adverse)
Both activity variance and spending variance for direct material costs are favorable

8.
#MC# Which of the following is a limitation on the use of standard cost system as a tool to
evaluate management performance at the business units?
It is difficult for business units to attain the standard cost when they have to adjust to
increase the production volume
When business units reduce the production volume, the favorable cost variance does not
accurately reflect their cost management performance because no matter how the business
units control costs, they always fulfill the cost standard well.
It is unfair to use the standard cost system to evaluate management performance in
different business units.
x When business units are too focused on achieving the standard cost, it can lead to
conservatives who do not accept the arising of new costs and the costs associated with
quality and productivity improvement, results in the decrease in competition capacity.

9.
#MC# Tony Company uses a standard cost system to plan and control the production cost of
 product Y in July. The standard direct materials cost for each unit of product Y is
$25/unit (5 metres/unit *$5/metre). The estimated production volume for the month is
10,000 units. In July, Tony Company used 48,000 metres of direct material to produce
8,000 units with a purchase price of $4.5/metre. Which of the following statements is
correct?
Quantity variance of direct material cost is $40,000 (unfavorable)
Price variance of direct material cost is $24,000 (unfavorable)
Total direct material cost variance is $16,000 (favorable)
All variance of direct material cost including quantity variance, price variance and total
variance are favorable
Quantity variace=(48,000-8,000u*5m/u)*$5/m=$40,000(U)=(AQ-SQ)*SP
Rrice variance = 48,000*(4,5-5)=-24,000=AQ*(AP-SP)
Total variannce= $40,000 (U)+$-24,000(F)=$16,000
10.
#MC# Andy Garment Corporation uses a standard cost system to plan and control the garment
costs of product Z in June. The standard direct materials cost for each unit of product Z is
$100/unit (4 metres/unit *$25/metre). The estimated production volume for the month is
80,000 units. In June, the Corporation bought 400,000 metres with a purchase price of
$28/metre and only used 300,000 metres to produce 60,000 units. Which of the following
statements is correct?
Direct material cost variance due to the change in production volume is adverse with the
increase in direct material cost of $2,000,000
Direct material cost variance due to the change in the direct material cost per unit
(spending per unit) is favorable with the decrease in direct material cost of $2,400,000
Direct material cost variance due to the change in the material usages is favorable with
the decrease in direct material cost of $1,500,000
Direct material cost variance due to the change in the price of material is adverse with the
increase in direct material cost of $900,000
a/ activity variance = (60,000-80,000)*4m/u*$25/m = -2,000,000(F)
b/ speding variance=actual cost – flexible buddgeted cost (chapter2)
=actual units*(actual cost/u – standard cost/u)
= 300,000*28-60,000*4*25=2,400,000(unfa)
c/ quantity variance=(AQ – SQ)*SP= (300,000m-60,000u*4m/u)*$25/m=1,500,000(un)
d/ price variance= AQp*(AP-SP)= 400,000*(38-35)=900,000(un)
11.
#MC# Which of the following decisions falls within the rights and responsibilities of an
investment center manager in a decentralized organization?
Deciding the production costs incurred in the period at the production department
Deciding the revenues and selling costs incurred in the period at the selling department
Deciding the revenues and total costs incurred in the period at the business units.
Deciding the capitals and their profitability invested in the projects of expanding
production plants

12.
#MC# Company AB has two segments, segment X and segment Y. Which of the following
changes will not affect their segment margin on the segment report.
Increasing the selling price and variable costs in each segment.
Rearranging the decentralized and hierarchical management system in the company.
Changing the internal transfer pricing method of products from division X to division Y,
specifically changing from cost-based pricing to market-based pricing.
Increasing common fixed costs and changing allocation bases of common fixed costs
which belongs to the responsibility of the general director.

13.
#MC# Anthony Company has following information related to the Investment Center managed
by its manager – Kenny.
Year X Year X+1
Revenue 2,000,000 4,000,000
Variable cost to sales ratio 70% 80%
Segment fixed costs 200,000 400,000
Allocated common fixed costs 100,000 200,000
 Average total assets 2,000,000 2,500,000
Minimum desired ROI 8% 10%
Over the past two years, Kenny has
contributed to an increase in the profit margin of his segment by 10%
caused a decrease in the asset turnover of his segment by 0.6 rounds
contributed to an increase in the ROI of his segment by 4%
caused a decrease in the residual income of his segment by $90,000

14.
#MC# Benny Company bases on ROI to research and choose a business plan. Currently, in the
year X, the company has the following data:
Production volume 10,000 units
Selling price per unit $4,000/unit
Variable costs per unit $3,200/unit
Total fixed costs $6,000,000
Average total assets $20,000,000

Next year, in order to increase the return on investment (ROI) by 5%, the company plans
to increase some items like the selling price by 8%, variable costs per unit by 10%, total
fixed costs by 20%, sales volume by 30% and total assets by 25%.
The plan will cause a decrease in the company's current ROI
By applying that plan, the company can not achieve an increase in ROI by 5%
By applying that plan, the company can achieve an increase in ROI by 5%
By applying that plan, the company can achieve an increase in ROI beyond 5%

15.
#MC# Andy & Benny Corporation has two subsidiary units, Andy company and Benny
company. Andy company is producing and selling the component “A” in the market with
the selling price of $2,500 per unit, variable cost of $1,800 per unit, total fixed cost of
$3,500,000, sales volume of 10,000 units and the production capacity of 14,000 units.
Benny company processes the product “B” from the component “A” and buys the
component A on the market with a purchase price of $2,300 per unit. Benny company is
considering to buy 8,000 components “A” from Andy company with the purchase price of
$2,200 per unit.
Andy Company applies the internal transfer pricing based on market price given that
variable costs will be reduced by 10% when the component “A” is produced and
transferred internally. If the internal transferred is implemented, then
The minimum transferred price is $2,150 per unit
Profit of Andy company is increased by $1,840,000
Profit of Benny company is increased by $2,640,000
Profit of Andy & Benny Corporation is increased by $4,480,000

16.
#MC# Supply chain is defined as
the association of all enterprises providing products and services
the association of all enterprises consuming products and services
the association of all enterprises directly meeting the customers’ needs
x the association of all enterprises directly and indirectly meeting the customers’ needs

17.
#MC# Sammy Company is considering to choose one of two raw material suppliers, Anthony
supplier and Ben supplier, based on the information as follows:
Anthony supplier Ben supplier
Total units of materials purchased 1,000 units 2,000 units
Purchase price per unit $2,500/unit $2,000/unit
Supplier activity costs
- At unit level $2,000,000 $4,000,000
- At order level $1,000,000 $3,000,000
- At supplier level $2,000,000 $5,000,000
 Supplier Performance Index (SPI) of Anthony Supplier is 0.50.
Supplier Performance Index (SPI) of Anthony Supplier is higher than that of Ben
Supplier.
The cost of owner ship per 1 dollar of material purchase price from Anthony Supplier is
3.
The cost of owner ship per 1 dollar of material purchase price from Anthony Supplier is
higher than that from Ben Supplier.

18.
#MC# ABC Company has 3 factories, namely Factory A, B and C. Below is the information
related to each factory.
Factory A Factory B Factory C
Wait time 10 30 20
Process time 10 18 14
Inspection time 7 6 6
Move time 5 6 16
Queue time 18 20 14

Which of the following statements is correct with the above data?

Throughput (/manufacturing cycle) time of Factory A is highest.
Delivery cycle time of Factory A is highest.
Manufacturing cycle efficiency (MCE) of Factory A is lowest.
The ratio of Non-value-added time on delivery cycle time of Factory A is lowest.

19.
#MC# Which of the following statements is a definition of quality under the customers’
perspective?
Quality is defined as the technical standards designed to best meet customers’ needs at an
acceptable price.
x Quality is defined as the conformance to specifications at acceptable costs.
x Quality is defined as the technical standards designed to best meet customers’ needs at an
acceptable price and the conformance to specifications at acceptable costs.
Quality is defined as the technical standards to ensure firm achieve the highest profit.

20.
#MC# In order to provide information for quality management, managerial accountants of ABC
company have collected detailed information on quality costs over the past 2 years as
follows:
Year X ($) Year X+1 ($)
Cost of quality planning 500,000 4,000,000
Cost of inspecting materials 1,000,000 1,500,000
Cost of inspecting finished goods 1,000,000 2,000,000
Cost of assessing the spoilage 200,000 200,000
Cost of downtime for repairing the spoilage 1,600,000 800,000
Cost of warranty claims 2,500,000 200,000
Cost of processing customer complains 2,700,000 800,000
Cost of quality reporting 500,000 900,000

Which of the following statements is correct with the above data?

In year X, prevention costs accounted for 5% of total quality cost.
Over the past 2 years, prevention costs decreased in value and proportion.
Over the past 2 years, appraisal cost decreased in value and proportion.
Over the past 2 years, reasonable costs tended to increase and failure costs tended to
decrease.