This quiz works best with JavaScript enabled. Home > Finance > Accounting > Budgeting > Flexible Budgets > Flexible Budgets – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Flexible Budgets Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. A static budget is: A) A budget for a single level of activity. B) Used when the mix of products does not change. C) Used only for fixed costs. D) A budget that ignores inflation. Show Answer Correct Answer: A) A budget for a single level of activity. 2. A variance ..... an actual amount and the budgeted amount A) Can increase. B) Is the difference between. C) Can decrease. D) None of above. Show Answer Correct Answer: B) Is the difference between. 3. If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a(n): A) Unfavorable spending variance. B) Favorable efficiency variance. C) Favorable spending variance. D) Unfavorable efficiency variance. Show Answer Correct Answer: C) Favorable spending variance. 4. MNL Company wishes to calculate its return on assets. You know that the return on equity is 12% and the debt ratio is 40%. What is the return on assets? A) 7.20%. B) 12.00%. C) 4.80%. D) 20.00%. Show Answer Correct Answer: A) 7.20%. 5. Managers need to know why variance occurred A) To take corrective actions. B) To pinpoint problems. C) Both. D) None of above. Show Answer Correct Answer: C) Both. 6. Analyze the following:Current raio 2.0Acid test ratio 1.5Current liabilities P 120, 000Inventory Turnover 8Gross Margin Percentage 40%The sales for the year were? A) P 240, 000. B) P 800, 000. C) P 480, 000. D) P 1, 200, 000. Show Answer Correct Answer: B) P 800, 000. 7. What is the difference between standard and normal costing? A) Standard costing uses actual hours, normal costing uses standard allowed hours. B) Quantity of hours used. C) No difference. D) None of above. Show Answer Correct Answer: B) Quantity of hours used. 8. LYR, a retail Company, had a cost of goods sold of P 1, 000, 000 last year. the beginning inventory balance was P 90, 000 and the ending inventory balance was P 100, 000. The Company's inventory turnover ratio was closest to A) 10. B) 10.53. C) 11.11. D) 9.86. Show Answer Correct Answer: B) 10.53. 9. A flexible budget A) Summarizes revenues and expenses for only one level of sales volume. B) Summarizes revenues and expenses for various levels of sales volume. C) Summarizes revenues and expenses for the income statement. D) None of above. Show Answer Correct Answer: B) Summarizes revenues and expenses for various levels of sales volume. 10. The master budget A) Is a static budget. B) Is prepared for at least 2 levels of sales volume. C) Is flexible. D) None of above. Show Answer Correct Answer: A) Is a static budget. 11. Bucks Company desires and ending inventory of P 62, 000 and a beginning inventory of P 55, 000. Gross Profit is estimated to be 25% of sales. The expected sales amounted to P 320, 000. Budgeted purchases would amount to A) P 247, 000. B) P 370, 000. C) P 230, 000. D) P 240, 000. Show Answer Correct Answer: A) P 247, 000. 12. In a highly decentralized organization, the best option for measuring the performance of subunits is the establishment of A) Product Centers. B) Marketing centers. C) Cost centers. D) Revenue Centers. Show Answer Correct Answer: C) Cost centers. 13. What is the most important purpose of a balanced scorecard? A) To set prices for products. B) To properly measure performances. C) To develop strategies. D) To begin the budgeting process. Show Answer Correct Answer: B) To properly measure performances. 14. Variance is Favorable (F) if A) An actual amount decreases operating income. B) The budget amount is equal to the operating income. C) An actual amount increases operating income. D) None of above. Show Answer Correct Answer: C) An actual amount increases operating income. 15. A company hired workers with less skill than those already working. Which variance would least likely be affected? A) Material price variance. B) Material use variance. C) Variable overhead efficiency variance. D) Labor rate variance. Show Answer Correct Answer: A) Material price variance. 16. Are Production overheads fixed, variable or mixed A) Fixed. B) Variable. C) Mixed. D) None of above. Show Answer Correct Answer: C) Mixed. 17. Managers divide the static budget variance into A) Flexible budget variance and Sales volume variance. B) Master budget variance and Sales volume variance. C) Static budget variance and Sales volume variance. D) None of above. Show Answer Correct Answer: A) Flexible budget variance and Sales volume variance. 18. Sales volume variance occurs because A) Of inflation. B) Sales price/cost per unit and the fixed cost was different than planned. C) Actual number of units sold differs from the amount in the static budget. D) None of above. Show Answer Correct Answer: C) Actual number of units sold differs from the amount in the static budget. 19. Page 583.Are Material Costs fixed, variable or mixed? A) Fixed. B) Variable. C) Mixed. D) None of above. Show Answer Correct Answer: B) Variable. 20. IN 2017, ABC Company's net income was P 200, 000, and in 2018, it was P 50, 000. What percentage increase in net income must ABC achieve in 2019 to offset the 2018 decline in net income? A) 300%. B) 60%. C) 600%. D) 400%. Show Answer Correct Answer: A) 300%. 21. Static budgets are: A) Prepared for a range of activity levels. B) Updated for the actual level of activity. C) Provide valid basis for comparing actual and expected costs. D) Prepared for a single, planned level of activity. Show Answer Correct Answer: D) Prepared for a single, planned level of activity. 22. A zero budget is: A) Is a method of budgeting for a single level of activity. B) Is a method of budgeting that ignores inflation. C) Is a method of budgeting that used only for fixed costs. D) Is a method of budgeting in which all expenses must be justified for each new period. Show Answer Correct Answer: D) Is a method of budgeting in which all expenses must be justified for each new period. 23. In evaluating the performance of a profit manager, which of the following would be used? A) Residual Income. B) Segment Margin. C) Return on Investment. D) Economic value-added. Show Answer Correct Answer: C) Return on Investment. 24. Flexible budget variance occurs because A) Of inflation. B) Sales price/cost per unit and the fixed cost was different than planned. C) Actual number of units sold differs from the amount in the static budget. D) None of above. Show Answer Correct Answer: B) Sales price/cost per unit and the fixed cost was different than planned. 25. ABC Company recently declared and issued a 50% stock dividend. This transaction will reduce the company's A) Current ratio. B) Return on operating assets. C) Debt to equity ratio. D) Book value per common share. Show Answer Correct Answer: D) Book value per common share. 26. In a standard cost system, overhead is applied to production on the basis of: A) The denominator hours chosen for the period. B) The actual hours required to complete the output of the period. C) The standard hours allowed to complete the output of the period. D) None of these. Show Answer Correct Answer: C) The standard hours allowed to complete the output of the period. 27. Which will be captured as product costs in the WIP account? A) Actual variable overhead. B) Flexible budget for variable overhead, based on standard DLH allowed for actual output. C) Budget for variable overhead based on actual DLH. D) None of above. Show Answer Correct Answer: B) Flexible budget for variable overhead, based on standard DLH allowed for actual output. 28. A static budget variance is the difference between A) Actual results and the expected results in the flex budget. B) Master budget results and the expected results in the static budget. C) Actual results and the expected results in the master budget. D) None of above. Show Answer Correct Answer: C) Actual results and the expected results in the master budget. 29. Which of the following is a common measure of liquidity? A) Accounts receivable turnover. B) Return to total assets. C) Return on sales. D) Debt to equity. Show Answer Correct Answer: A) Accounts receivable turnover. 30. Variance is Unfavorable (U) if A) An actual amount decreases operating income. B) The budget amount is equal to the operating income. C) An actual amount increases operating income. D) None of above. Show Answer Correct Answer: A) An actual amount decreases operating income. 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