L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

FINALS EXAMINATION – CAE 10 Strategic Cost Management

1st Semester, AY 2019– 2020
Prepared by: Amie Jane R. Miranda, CPA

Name:_____________________________________ Score:____________________

Student No.: _______________ Year/Section:___________ Date of Exam: ____________

I. MULTIPLE CHOICES. Choose the best answer from the choices and encircle your answer. Strictly “NO
ERASURES”. Show your solution.

1. Budgeting is
a. The process of creating a formal plan and translating goals into a quatitative format.
b. A technique for comparing actual costs with standard cost
c. A technique for determining the cost of manufactured products.
d. A means of product costing that emphisizes activities as basic cost objects.
2. Which of the following statement is correct?
a. Budgets ensure goal congruence between superiors and subordinates.
b. Budgets define responsibility centers and promote communication and coordination among
organization segements.
c. Budgets foster the planning of operations and facilitate the fixing of blame for missed
budget predictions.
d. Budget foster the planning of operations, provide framework for performance evaluation,
and promote communication and coordination among organization segments.
3. Budgets are related to the following management functions, except
a. Planning
b. Control
c. Performance evaluation
d. None of the above
4. It involves the forecasting of realizable results over a definite period or periods, the planning
and coordination of the various operations and functions of the business to attain realizable
results, and control of variations from the approved plan
a. Cost control
b. Budgeting
c. Internal control
d. Vouching
5. Which of the following statements regarding bedgeting is incorrect?
a. Planning and control are the essential features of the budgeting process.
b. Capital expenditures budget shows the availability of idle cash for investment.
c. Budgeting provides a measuring device to which subsequent performances are compared
and evaluated.
d. Budget preparation is not the sole responsibility of any one organizational segment and is
prepared by combining the efforts of many individuals.
6. Which of the following is not a primary purpose of preparing a budget?
a. To communicate the company’s plans throughout the entire business organization.
b. To provide a basis for comparison of actual performance.
c. To control revenues and expenses during a given period.
d. To make sure that the company expands its operations.
7. The master budget
a. Shows a comparison of forecasted and actual results
b. Is composed of the operating and financial budgets.
c. Reflects only those costs controllable by the individual manager.
d. Is the budget of the master of the firm.

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8. In budgeting, a planning calendar is the
a. Schedule of dates at which goals are to be met
b. Calendar year covered by the budget
c. Schedule of activities for the development and adoption of the budget.
d. Schedule of dates when new products should be launched in the market.
9. A budget manual describes how a budget is to be presented. It usually includes a budget
planning calendar and
a. The company policies regarding the authorization of transactions
b. Documentation of the accounting system software
c. Distribution instructions for budget schedules.
d. A chart of accounts
10. The budget element(s) included in the financial budget process are the following, except the
a. Budgeted balance sheet
b. Capital budget
c. Cash budget and budgeted statement of cash flows
d. Budget variance
11. Following are parts of the operating budget, except
a. Sales budget
b. Material cost budget
c. Capital budget
d. Production budget
12. Ernie Trading Co. budgeted merchandise purchases of 40,000 units next month. The expected
beginning inventoy is 12,000 units and the desired inventory at the end of next month is 15,000
units. Budgeted sales in units for next month is
a. 37,000
b. 43,000
c. 55,000
d. 52,000
13. Edil Producers, Inc. will start its commercial operations on January 1, 200A. The sales forecast
per the sales manager’s estimates for its first year of operations is 50,000 units. However, the
production manager estimated that only 80% of the sales forecast can be produced with the
available workforce and equipment. The product will be sold for 20 per unit. The budgeted peso
sales for Edil Producer’s, Inc.’s initial year of operations is
a. 800,000
b. 1,000,000
c. 50,000
d. 40,000
14. Hershey Company has budgeted sales of 90,000 units in January; 120,000 units in February; and
180,000 units in March. The company has 20,000 units on hand on January 1. If Hershey
Company requires an ending inventory of finished goods equal to 20% of the following month’s
sales, the budgeted production during February should be
a. 96,000
b. 108,000
c. 120,000
d. 132,000
15. Tasyo Company has budgeted sales of 90,000 units in Januuary; 120,000 units in February; and
180,000 in March. The company has 20,000 units of finished goods and 35,000 pieces of
materials on hand on January 1. Each unit of product requires 5 pieces of materials. The desired
inventory of finished goods and materials at the end of each month is as follows:
Finished goods - 20% of next month’s sales
Materials - 25% of the next month’s production needs
How many pieces of materials should the company plan to purchase in January?
a. 600,000
b. 567,000
c. 468,000
d. 552,500
Items 16-17 are based on the following information:
Nicely Wyn Corporation has the following budgeted production for four months:

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 April 50,000
May 40,000
June 45,000
July 60,000
Each unit of product requires 2 pieces of raw materials. The desired ending raw materials
inventory for each month is 130% of the following month’s production needs, plus 2,000 pieces.
(The April 1 inventory meets this requirement.)

The product is processed in two departments (Dept. A and Dept. B) and the direct labor
standards are as follows:
Hours per Unit Rate per Hour Labor Cost per unit
Department A 6 30 180
Department B 2 40 80
16. What is the budgeted purchase of raw materials in June?
a. 51,000
b. 84,000
c. 120,000
d. 129,000
17. What is the budgeted direct labor cost for the month of May?
a. 13,000,000
b. 11,700,000
c. 10,400,000
d. 7,200,000
18. Fame Company has the following budgeted formula for factory overhead costs:
FOH=5,000,000 per month + 300 per unit of product
If the company plans to produce 50,000 units in January, how much is the budgeted factory
overhead cost?
a. 20,000,000
b. 15,000,000
c. 5,000,000
d. 5,050,300
19. Bugnot Corporation’s budget includes the following data:
Budgeted sales 7,200
Inventories: Beginning Ending
Finished goods 300 400
Work-in-process in equivalent units 60 160
How many equivalent units should Bugnot Corporation plan to produce during the budget
period?
a. 7,300
b. 7,400
c. 7,000
d. 7,200
Items 20-21 are based on the following information:
Cudal Company prepared the following figures for its only product as a basis for its 200B budget:
Budgeted Sales 240,000 units
Selling price 5
Required materials per unit of product 2 pieces
Materials beginning inventory 20,000 pieces
Materials ending inventory 24,000 pieces
Purchase price per peiece of material 3
Finished goods beginning inventory 15,000 units
Finished goods ending inventory 18,000 units
Direct labor hours, per 1,000 units of product 60 hours
Direct labor rate per hour 30
Variable factory overhead rate per hour 10
Fixed factory overhead 300,000
20. The budgeted peso amount of materials purchases is
a. 1,458,000

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 b. 2,450,000
c. 1,470,000
d. 741,000
21. The total budgeted manufacturing cost for 200B is
a. 2,341,200
b. 884,658
c. 2,041,200
d. 2,353,200
Items 22-23 are based on the following information:
Garcia Corporation has the following budget estimate for the year 200B:
Sales 2,800,000
Income before tax 10% of sales
Selling and administrative expenses 25% of sales
Conversion cost 70% of total manufacturing cost
Inventories are budgeted as follows:
Beginning Ending
Materials 176,000 216,000
Work-in-Process 200,000 240,000
Finished goods 280,000 336,000
22. The budgeted cost of goods sold is
a. 1,764,000
b. 1,820,000
c. 534,800
d. 1,916,000
23. The budgeted purchases of raw materials is
a. 614,800
b. 574,800
c. 534,800
d. 1,916,000
24. Following is the sales budget of U2 Company for the period January to June 2019:
Months Units
January 100,000
February 90,000
March 90,000
April 80,000
May 70,000
June 70,000
The company’s projection is to have inventory on hand at the end of ech month equal to 70% of
the sales for the month following. It is assumed that the inventory at the end of December 2019
will meet this requirement. It is also estimated that the 80,000 units will sold in July 2019. What
is the total production budget in units for the six months period ending June 30, 2019?
a. 556,000
b. 486,000
c. 524,000
d. 479,000
25. Backstreet Girls Corporation plans to sell 200,000 units of product Xey in July and anticipated a
growth in sales of 5% per month. The target ending inventory in units of the product is 80% of
the next month’s estimated sales. There are 150,000 units in inventory as of the end of June.
The production requirement in units of Xey for the quarter ending September 30 would be
a. 670,560
b. 691,525
c. 665,720
d. 675,925
26. Tei Company’s 2019 budget contains the following information (in units):
Beginning finished goods inventory 85
Beginning work-in-process in equivalent units 10
Desired ending finished goods inventory 100
Desired ending work-in-process in equivalent units 40

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 Projected sales for 2019 1,800
How many equivalent units should Tei plan to produce in 2019?
a. 1,800
b. 1,565
c. 1,815
d. 1,845
27. Southful, Inc. desires to reduce its inventory of a particular raw material by 40%. The inventory
at the beginning of the budget period is 240,000 units, and the company plans to manufacture
168,000 units of output. Each of these units require 2.5 units of raw materials. How much of the
raw materials should be purchased during the budget period?
a. 316,000 units
b. 276,000 units
c. 324,000 units
d. 139,600 units
28. Donald Company is budgeting sales of 42,000 units of produce Y for March 2019. To make one
unit of finished product, three pounds of raw material A are required. Actual beginning and
desired ending inventories of raw materials A and product Y are as follows:
March 1, 2019 March 31, 2019
Raw material A 100,000 pounds 110,000 pounds
Product Y 22,000 units 24,000 units
There is no work-in-process inventory for product Y at the beginning and end of March. For the
month of March, how many pounds of raw material A is Donnie planning to purchase?
a. 126,000
b. 132,000
c. 136,000
d. 142,000
For items 29-30 are based on the following information:
Russel Gil Corporation has the following budget estimates for its second year of operations:
Projected sales – 3,500,000
Projected income before tax – 12% of sales
Estimated selling and administrative expenses – 25% of sales
Direct labor and factory overhead are budgeted at 70% of the total manufacturing cost.
Inventories are estimated as follows:
Raw Materials Goods-in-process Finished goods
Beginning 220,000 250,000 350,000
Ending 270,000 300,000 420,000
29. The estimated cost of goods sold would be:
a. 2,275,000
b. 2,205,000
c. 2,325,000
d. 1,750,000
30. The estimated purchases of raw materials would be
a. 967,500
b. 732,500
c. 697,500
d. 747,500
31. Each unit of product Omega requires 3 kilos of raw material. Next month’s production budget
for product Omega is as follows:
Opening inventory:
Raw materials 15,000 kgs.
Finished goods 2,000 units
Budgeted sales 60,000 units
Finished ending inventory:
Raw materials 7,000 kgs
Finished goods 3,000 units
The number of kilograms of raw materials to be purchased next month is?
a. 172,000
b. 175,000

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 c. 183,000
d. 191,000
32. Each unit of product Jollicat takes five direct labor hours to make. Quality standards are high and
8% of units produced are normally rejected due to substandard quality. Next month budgets are
as follows:
Beginning inventory of finished goods 3,000 units
Planned ending inventory of finished goods 7,600 units
Budgeted sales of Jollicat 36,800 units
All stocks of finished goods must have successfully passed the quality control check. What is the
direct labor budget for the month?
a. 198,720 hours
b. 200,000 hours
c. 223,560 hours
d. 225,000 hours
Items 33-35 are based on the following information:
Rex Corporation is a manufacturer of tables sold to schools, restaurants, hotels and other
institutions. The tabletops are manufactured by Rex, but the table legs are purchased from an
outside supplier. The assembly Department takes a manufactured tabletop and attaches the
four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows
a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished
goods inventory. Rex also purchases sufficient raw materials to insure that raw materials
inventory is 60% of the following month’s scheduled production. Rex’s sales budget in units for
the next quarter is as follows:
July 2,300
August 2,500
September 2,100
Rex’s ending inventories in units for July 313, 2019 are
Finished goods 1,900
Raw materials (legs) 4,000
33. The number of tables to be produced during August 2019
a. 1,400 tables
b. 2,340 tables
c. 1,440 tables
d. 1,900 tables
34. Disregarding your response to question 33, assume the required production for August and
September is 1,600 and 1,800 units, respectively, and the July 31, 2019 raw materials inventory
is 4,200 units. The number of table legs to be purchased in August is
a. 6,250 legs
b. 9,400 legs
c. 2,200 legs
d. 6,400 legs
35. Assume that Rex Corporation will produce 1,800 units in the month of September 2019. How
many employees will be required for the Assembly Department? (Fractonal emlployees are
acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-
week month.)
a. 15 employees
b. 3.75 employees
c. 600 employees
d. 1.5 employees
36. Southwing Company is preparing a flexible budget for 2019 and the following maximum capacity
estimates for department M are available
At maximum capacity
Direct labor hours 60,000
Variable factory overhead 150,000
Fixed facrory overhead 240,000
Assume that Southwing’s normal capacity is 80% of maximum capacity. What would be the total
factory overhead rate, based on direct labor-hours, in a flexible budget at normal capacity?
a. 6.00

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 b. 6.50
c. 7.50
d. 8.13
37. Whole Corporation’s master budget shows straight-line depreciation machinery of 516,000
based on an annual production volume of 103,200 units of product. In July, it produced 8,170
units of product, and the accounts had the actual depreciation on machinery of 41,000. It
controls manufacturing costs with a flexible budget. The flexible budget amount for depreciation
on machinery for July is
a. 38,950
b. 43,000
c. 41,000
d. 40,850
38. Which of the following is not a function of budgeting?
a. Controlling
b. Planning
c. Decision making
d. Motivating
39. All of the following are benefits of budgeting except:
a. Budgeting provides assurance that the company will achieve its objectives.
b. Budgeting facilitates the coordination of activities.
c. Budgeting requires managers to plan ahead.
d. Budgeting provides specific benchmarks for evaluating performance.
40. Which of the following is not a benefit of budgeting?
a. It promotes study, research and a focus on the future
b. It is a source of motivation
c. It will prevent net losses from occurring
d. It is a means of coordinating business activities

II. COMPUTATION: Show your complete solutions (10 pts)

A partially completed flexible overhead budget for Sunflowers Inc. is shown below:
Activity Level in Units
Cost Formula 8,000 12,000 16,000
Variable Overhead:
Supplies _____ 108,000 _____
Utilities _____ 60,000 _____
Repairs _____ 24,000 _____
Total Variable Overhead _____ 192,000 _____
Fixed overhead:
Depreciation _____ 15,000 _____
Salaries _____ 96,000 _____
Rent _____ 44,000 _____
Total fixed overhead _____ 155,000 _____
Total overhead _____ 347,000 _____
Required: Fill in the missing data.
ajmiranda
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Goodluck and Godbless

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, FRIAcc

Dean, College of Business Education

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