Professional Documents
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309
Strategic Planning
1. Question ID: ICMA 19.P1.016 (Topic: Strategic Planning)
A company is in the process of developing its mission statement. Which one of the following is least
appropriate for a company’s mission statement?
A. Market focus.
B. Differentiation.
C. Financial leadership.
D. Cost focus.
A. dog.
B. star.
C. question mark.
D. cash cow.
A. Contingency planning.
B. Long-term business planning.
C. Capital budgeting.
D. Short-term business planning.
10. Question ID: HOCK CMA P3A H15 (Topic: Strategic Planning)
The sources of a company's distinctive competencies are:
A. Societal culture.
B. Organizational culture.
C. Organizational structure.
D. Employee morale.
A. The successful company has adopted more steps to its formal strategic planning process.
B. The strategies that the successful company pursues have a strong impact on its performance
relative to its rivals.
C. The company has evolved into a multi-divisional organization.
D. The company has adopted a strategy with a low propensity for risk-taking.
A. Target product mix and production schedule to be maintained during the year.
B. Forms of organizational structure that would best serve the entity.
C. Best ways to invest in research, design, production, distribution, marketing, and administrative
activities.
14. Question ID: HOCK CMA P3A H47 (Topic: Strategic Planning)
Profitability is derived from three basic factors. Which of the following is not one of those?
A. The amount of value placed on the company's products or services by the customer.
B. The costs of creating the company's products or services.
C. The price that the company charges for its products and services.
D. Research and development that is highly innovative.
A. be able to distribute its product more quickly than other industry competitors.
B. spend more money on advertising than its competitors do.
C. be more profitable than the average company in its industry.
D. have distribution channels that are wider than others in its industry.
16. Question ID: HOCK CMA P3A H10 (Topic: Strategic Planning)
Michael Porter's Five Forces Model helps managers to analyze forces that shape competition within
an industry in order to identify opportunities and threats in their industry environments. Which of the
following forces is not one of the Five Forces?
17. Question ID: HOCK CMA P3A H17 (Topic: Strategic Planning)
To avoid failure, a company must maintain a constant focus on all of the following except:
A. Capital budget.
B. Strategic plan.
C. Cash management budget.
D. Operating budget.
22. Question ID: HOCK CMA P3A H35 (Topic: Strategic Planning)
Some of the benefits that horizontal integration may provide include the all of the following except:
A. Strategy.
B. Mission Statement.
C. Competency.
D. Values.
25. Question ID: HOCK CMA P3A H30 (Topic: Strategic Planning)
Which of the following is not a characteristic of a tactical plan:
26. Question ID: HOCK CMA P3A H45 (Topic: Strategic Planning)
The four factors that derive from a company's distinctive competencies and which create competitive
advantage are
27. Question ID: HOCK CMA P3A H49 (Topic: Strategic Planning)
Four generic competitive strategies can be used to achieve competitive advantage. Which of the
following is not one of those strategies?
A. Differentiation.
B. Innovation.
C. Focused cost leadership.
D. Cost leadership.
28. Question ID: HOCK CMA P3A H24 (Topic: Strategic Planning)
Companies group customers in order to gain a competitive advantage. This is called:
A. Positioning.
B. Product differentiation.
C. Market segmentation.
D. Customer differentiation.
31. Question ID: HOCK CMA P3A H25 (Topic: Strategic Planning)
Strategic managers use different business-level strategies to put the company's business model into
action. Business-level strategies include all of the following except
A. How and where to invest the company's capital in ways that will result in competitive advantage.
B. How much to differentiate and how to price the company's product or service.
C. What products should be offered and to which customer groups (market segments).
D. How to improve the product attributes, the service attributes and personnel attributes associated
with the company's product.
A. Vendors have asked that the contract price for the goods they supply to Cerawell be renegotiated
and adjusted for inflation.
B. Experienced employees have decided to terminate their employment with Cerawell and go to
work for the competition.
C. A competitor has achieved an unexpected technological breakthrough that has given them a
significant quality advantage, and has caused Cerawell to lose market share.
D. A new machine that was purchased this year has not helped reduce Cerawell's unfavorable labor
efficiency variances.
34. Question ID: HOCK CMA P3A H37 (Topic: Strategic Planning)
One of the steps in the the strategic planning process is analyzing external factors in order to identify
the organization's opportunities and threats. Which of the following is not a part of external analysis?
Budgeting Concepts
35. Question ID: ICMA 19.P1.030 (Topic: Budgeting Concepts)
The major objectives of budgeting are to
A. define responsibility centers, facilitate the identification of blame for missed budget predictions,
and ensure goal congruence between superiors and subordinates.
B. define responsibility centers, provide a framework for performance evaluation, and promote
communication and coordination among the organization’s segments.
C. foster the planning of operations, provide a framework for performance evaluation, and promote
communication and coordination among the organization’s segments.
D. foster the planning of operations, facilitate the identification of blame for missed budget
predictions, and ensure goal congruence between superiors and subordinates.
A. operating budget.
B. capital budget.
C. master budget.
D. financial budget.
Planning guidelines are disseminated downward by top management after receiving input
from all levels of management.
A sales budget is prepared by individual sales units reflecting the sales targets of the various
segments. This provides the basis for departmental production budgets and other related
components by the various operating units. Communication is primarily lateral with some
upward communication possible.
A profit plan is submitted to top management for coordination and review. Top
management's recommendations and revisions are acted upon by middle management. A
revised profit plan is resubmitted for further review to top management.
Top management grants final approval and distributes the formal plan downward to the
various operating units.
This outline of steps best describes which one of the following approaches to budget development?
A. Capital budget.
B. Static budget.
C. Flexible budget.
D. Zero-base budget.
A. Management by objectives.
B. Budgetary slack.
C. Strategic planning.
D. Continuous budgeting.
A. Have the divisional and senior management jointly develop goals and objectives while
constructing the corporation's overall plan of operation.
B. Have senior management develop the overall goals and permit the divisional manager to
determine how these goals will be met.
C. Permit the divisional manager to develop the goal for the division that in the manager's view will
generate the greatest amount of profits.
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Section B - Planning, Budgeting, and Forecasting.
Questions
D. Have the divisional and senior management jointly develop goals and the divisional manager
develop the implementation plan.
A. $1.46.
B. $0.68.
C. $0.44.
D. $1.90.
A. No, No, No
B. No, Yes, No
C. Yes, No, Yes
D. Yes, Yes, Yes
A. zero-based budgeting.
B. budgetary slack.
C. flexible budgeting.
D. budgetary variance.
1. Develop the budgets by top management and issue them to lower-level operating units.
2. Study the actual revenues and expenses of previous periods in detail.
3. Have the budgets developed by operating units and accept them as submitted by a
company-wide budget committee.
4. Share the budgets with all employees as a means to reach company goals and objectives.
5. Use an iterative budgeting process that has several "rounds" of changes initiated by
operating units and/or senior managers.
Which one of these activities should Amador implement in order to best remedy Thomas's concerns,
help eliminate the problems experienced by Amador, and motivate personnel?
A. 2 and 3.
B. 2 and 4.
C. 1 only.
D. 2, 4 and 5.
A. Is an expense whose actual amount will not normally differ from the standard (budget) amount.
B. Is an expected future expense that will be different under various alternatives.
C. Is one that is directly influenced at a given level of managerial authority within a given time period.
D. Is an expense that will remain semivariable in total over the relevant range in a given time period.
A. lacks the detailed knowledge of the daily operations and should limit their involvement.
B. needs to separate the budgeting process and the business planning process into two separate
processes.
C. should be involved only in the approval process.
D. needs to be involved, including using the budget process to communicate goals.
A. bottom-up budgeting.
B. top-down budgeting.
C. program budgeting and review technique.
D. zero-base budgeting.
A. Guidance is given to subunit managers about how standards and goals affect them.
B. The subunits in the organization compete with each other for the same input factors or for the
same customers.
C. There is little congruence among the overall organization goals, the subunit goals, and the
individual goals of decision makers.
D. Goals and standards of performance are set by the top-management.
A. Quantitative measures such as growth in unit sales, number of employees, and manufacturing
capacity.
B. Financial measures such as net income, return on investment, and earnings per share.
C. A combination of financial, quantitative, and qualitative measures.
D. Qualitative measures of organizational activity such as product innovation leadership, product
quality levels, and product safety.
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Section B - Planning, Budgeting, and Forecasting.
Questions
67. Question ID: ICMA 1603.P1.008 (Topic: Budgeting Concepts)
A continuous budget is one that
A. is created after the organization has been operating for at least one period.
B. is adjusted throughout the period for changing environmental factors.
C. uses the prior period's actual results as the current period's budget.
D. is available for a specified future period by adding a period to the period that just ended.
A. Individuals at all organizational levels are recognized as being part of the team; this results in
greater support of the organization.
B. Managers are more motivated to reach the budget goals since they participated in setting them.
C. The budget estimates are prepared by those in direct contact with various activities.
D. When managers set the final targets for the budget, top management need not be concerned with
the overall profitability of current operations.
A. Participative budgeting where managers pursue objectives consistent with those set by top
management.
B. A policy that allows managers to build slack into the budget.
C. Better communication whereby managers discuss budget matters daily with their superiors.
D. Preventive controls.
A. With the information technology available, the role of budgets as an organizational communication
device has declined.
B. To prevent ambiguity, once departmental budgeted goals have been developed, they should
remain fixed even if the sales forecast upon which they are based proves to be wrong in the middle
of the fiscal year.
C. The top-down approach to budgeting will not ensure adherence to strategic
organizational goals.
D. Since department managers have the most detailed knowledge about organizational operations,
they should use this information as the building blocks of the operating budget.
Rainbow, Inc.
Monthly Report for Department A
Actual Budget Variance
Units 1,000 900 100F
Variable production costs
Direct material $2,800 $2,700 $100U
Direct labor 4,800 4,500 300U
Variable factoy overhead 4,250 4,050 200U
Fixed costs
Depreciation 3,000 2,700 300U
Taxes 1,000 900 100U
Insurance 1,500 1,350 150U
Administration 1,100 990 110U
Marketing 1,000 900 100U
Total costs $19,450 $18,090 $1,360U
This monthly budget has been imposed from the top and will create behavior problems. All of the
following are causes of such problems except:
A. Company A does not differentiate between variable and fixed overhead in calculating its overhead
variances.
B. Company B uses the prior year's average actual cost as the current year's standard.
C. Company C investigates only negative variances.
D. Company D constantly revises standards to reflect learning curves.
A. Job-order costing.
B. Budget manual preparation.
C. Budgeting.
D. Process costing.
A. Forces management to evaluate the reasonableness of assumptions used and goals identified in
the budgetary process.
B. Provides a formal benchmark to be used for feedback and performance evaluation.
C. Ensures improved cost control within the organization and prevents inefficiencies.
D. Serves as a coordination and communication device between management and subordinates.
A. is not used until the end of the budget period to evaluate performance.
B. makes across-the-board cuts when early budget iterations show that planned expenses are too
high.
C. incorporates non-financial measures as well as financial measures into its output.
D. overemphasizes a fixed time horizon such as one year.
A. There could be dissatisfaction if the standards contain costs which are not controllable by the unit
held responsible.
B. The standards may appear to lack management support.
C. Employees could react negatively since they did not participate in setting the standards.
D. Brennan and Rose may not fully understand Cherry Valley's manufacturing process, resulting in
suboptimal performance.
A. Multiple regression analysis that includes independent variables associated with the nature of the
investment portfolio and market conditions.
B. Simple linear regression that compares investment income changes over the past five years to
determine the nature of the changes.
C. Ratio analysis that compares changes in the investment portfolio on a monthly basis.
D. Best practice analysis that compares the investment income as a percentage of total assets to a
competitor’s investment income as a percentage of total assets.
85. Question ID: ICMA 10.P1.017 (Topic: Forecasting Techniques - Regression Analysis)
The results of regressing Y against X are as follows.
Coefficient
Intercept 5.23
Slope 1.54
When the value of X is 10, the estimated value of Y is
A. 8.05
B. 6.77
C. 20.63
D. 53.84
86. Question ID: CMA 1290 4.27 (Topic: Forecasting Techniques - Regression Analysis)
In the standard regression equation y = a + b(x), the letter b is best described as a(n)
A. Dependent variable.
B. Constant coefficient.
C. Variable coefficient.
D. Independent variable.
87. Question ID: HOCK CMA.P1A2.01 (Topic: Forecasting Techniques - Regression Analysis)
A linear relationship between an independent and a dependent variable means that
A. a graph of the two variables will result in a straight line within the relevant range.
B. a forecast made using the historical data will be reasonably accurate.
C. the relationship between the two variables must be a direct one.
D. when the independent variable increases, the dependent variable increases by the same amount
as the independent variable has increased.
88. Question ID: CMA 1291 H1 (Topic: Forecasting Techniques - Regression Analysis)
A distinction between forecasting and planning
A. Arises because forecasting covers the short-term and planning does not.
B. Is not valid because they are synonyms.
C. Is that forecasts are used in planning.
D. Is that forecasting is a management activity whereas planning is a technical activity.
89. Question ID: CIA 1194 II.46 (Topic: Forecasting Techniques - Regression Analysis)
In regression analysis, which of the following correlation coefficients represents the strongest
relationship between the independent and dependent variables?
A. -.89
B. 1.03
C. .75
D. -.02
90. Question ID: ICMA 1603.P1.030 (Topic: Forecasting Techniques - Regression Analysis)
A company uses regression analysis in which monthly advertising expenses are used to predict
monthly product sales, both in millions of dollars. The results show a regression coefficient for the
independent variable equal to 0.8. This coefficient value indicates that
A. when monthly advertising is at its average level, product sales will be $800,000.
B. the average monthly advertising expenditure in the sample is $800,000.
C. advertising is not a good predictor of sales because the coefficient is so small.
91. Question ID: CMA 1290 4.28 (Topic: Forecasting Techniques - Regression Analysis)
The letter x in the standard regression equation is best described as a(n)
A. Coefficient of determination.
B. Constant coefficient.
C. Dependent variable.
D. Independent variable.
92. Question ID: CMA 1291 4.27 (Topic: Forecasting Techniques - Regression Analysis)
Automite Company is an automobile replacement parts dealer in a large metropolitan community.
Automite is preparing its sales forecast for the coming year. Data regarding both Automite's and
industry sales of replacement parts as well as both the used and new automobile sales in the
community for the last 10 years have been accumulated. If Automite wants to determine if its sales
of replacement parts are patterned after the industry sales of replacement parts or to the sales of
used and new automobiles, the company would employ
A. Statistical sampling.
B. Simulation techniques.
C. Time series analysis.
D. Correlation and regression analysis.
93. Question ID: CIA 593 III.64 (Topic: Forecasting Techniques - Regression Analysis)
What coefficient of correlation results from the following data?
X Y
1 10
2 8
3 6
4 4
5 2
A. +1
B. 0
C. -1
D. Cannot be determined from the data given.
94. Question ID: ICMA 10.P1.014 (Topic: Forecasting Techniques - Regression Analysis)
A company has accumulated data for the last 24 months in order to determine if there is an
independent variable that could be used to estimate shipping costs. Three possible independent
variables being considered are packages shipped, miles shipped, and pounds shipped. The
quantitative technique that should be used to determine whether any of these independent variables
might provide a good estimate for shipping costs is
A. flexible budgeting.
B. linear regression.
C. variable costing.
D. linear programming.
95. Question ID: ICMA 10.P1.016 (Topic: Forecasting Techniques - Regression Analysis)
In order to analyze sales as a function of advertising expenses, the sales manager of Smith
Company developed a simple regression model. The model included the following equation, which
was based on 32 monthly observations of sales and advertising expenses with a related coefficient
of determination of .90.
S = $10,000 + $2.50A
S = Sales
A = Advertising expenses
If Smith Company's advertising expenses in one month amounted to $1,000, the related point
estimate of sales would be
A. $11,250.
B. $12,500.
C. $12,250.
D. $2,500.
96. Question ID: ICMA 10.P1.013 (Topic: Forecasting Techniques - Regression Analysis)
For cost estimation simple regression differs from multiple regression in that simple regression uses
only
A. one dependent variable, while multiple regression uses more than one dependent variable.
B. one dependent variable, while multiple regression uses all available data to estimate the cost
function.
C. one independent variable, while multiple regression uses more than one independent variable.
D. dependent variables, while multiple regression can use both dependent and independent
variables.
98. Question ID: CMA 1285 5.27 (Topic: Forecasting Techniques - Regression Analysis)
The correlation coefficient that indicates the weakest linear association between two variables is
A. 0.35
B. -0.11
C. 0.12
D. -0.73
100. Question ID: ICMA 10.P1.023 (Topic: Forecasting Techniques - Learning Curves)
Propeller Inc. plans to manufacture a newly designed high-technology propeller for airplanes.
Propeller forecasts that as workers gain experience, they will need less time to complete the job.
Based on prior experience, Propeller estimates a 70% cumulative learning curve and has projected
the following costs.
If Propeller manufactures eight propellers, the total manufacturing cost would be
A. $112,000.
B. $62,643.
C. $54,880.
D. $50,660.
101. Question ID: ICMA 10.P1.026 (Topic: Forecasting Techniques - Learning Curves)
In competing as a subcontractor on a military contract, Aerosub Inc. has developed a new product
for spacecraft that includes the manufacturing of a complex part. Management believes there is a
good opportunity for its technical force to learn and improve as they become accustomed to the
production process. Accordingly, management estimates an 80% learning curve would apply to this
unit. The overall contract will call for supplying eight units. Production of the first unit requires 10,000
direct labor hours. The estimated total direct labor hours required to produce the seven additional
units would be
A. 30,960 hours.
B. 56,000 hours.
C. 70,000 hours.
D. 40,960 hours.
A. 79.0%
B. 62.5%.
C. 75.5%.
D. 80.0%.
103. Question ID: ICMA 10.P1.018 (Topic: Forecasting Techniques - Learning Curves)
Which one of the following techniques would most likely be used to analyze reductions in the time
required to perform a task as experience with that task increases?
A. Regression analysis.
B. Sensitivity analysis.
C. Learning curve analysis.
D. Normal probability analysis.
A. 7.29 minutes.
B. 8.1 minutes.
C. 5.90 minutes.
D. 6.56 minutes.
105. Question ID: ICMA 10.P1.022 (Topic: Forecasting Techniques - Learning Curves)
Aerosub Inc. has developed a new product for spacecraft that includes the manufacturing of a
complex part. The manufacturing of this part requires a high degree of technical skill. Management
believes there is a good opportunity for its technical force to learn and improve as they become
accustomed to the production process. The production of the first unit requires 10,000 direct labor
hours. If an 80% learning curve is used, the cumulative direct labor hours required for producing a
total of eight units would be
A. 80,000 hours.
B. 29,520 hours.
C. 64,000 hours.
D. 40,960 hours.
106. Question ID: CMA 690 5.22 (Topic: Forecasting Techniques - Learning Curves)
High Tech Industries, Inc. is in the process of preparing a competitive bid for the sale of a
customized product. High Tech is currently manufacturing a comparable specialized component that
is labor intensive with a long production run. The method that High Tech should use to project the
cost of manufacturing the proposed new customized product is
107. Question ID: CMA 692 4.5 (Topic: Forecasting Techniques - Learning Curves)
Lake Corporation manufactures specialty components for the electronics industry in a highly labor
intensive environment. Arc Electronics has asked Lake to bid on a component that Lake made for
Arc last month. The previous order was for 80 units and required 120 hours of direct labor to
manufacture. Arc would now like 240 additional components. Lake experiences an 80% learning
curve on all of its jobs. The number of direct labor hours needed for Lake to complete the 240
additional components is
A. 187.2.
B. 256.0.
C. 360.0.
D. 307.2.
108. Question ID: CMA 1294 4.28 (Topic: Forecasting Techniques - Learning Curves)
Seacraft Inc. received a request for a competitive bid for the sale of one of its unique boating
products with a desired modification. Seacraft is now in the process of manufacturing this product
but with a slightly different modification for another customer. These unique products are labor
intensive and both will have long production runs. Which one of the following methods should
Seacraft use to estimate the cost of the new competitive bid?
109. Question ID: ICMA 10.P1.021 (Topic: Forecasting Techniques - Learning Curves)
A manufacturing company has the opportunity to submit a bid for 20 units of a product on which it
has already produced two 10-unit lots. The production manager believes that the learning
experience observed on the first two lots will continue for at least the next two lots. The direct labor
required on the first two lots was as follows.
3,000 additional direct labor hours for the second lot of 10 units
The learning rate experienced by the company on the first two lots of this product using the
Cumulative Average-Time Learning Model is
A. 80.0%.
B. 62.5%.
C. 60.0%.
D. 40.0%.
111. Question ID: ICMA 10.P1.028 (Topic: Forecasting Techniques - Learning Curves)
Propeller Inc. plans to manufacture a newly designed high-technology propeller for airplanes.
Propeller forecasts that as workers gain experience, they will need less time to complete the job.
Based on prior experience, Propeller estimates a 70% cumulative learning curve and has projected
the following costs.
A. $98,000.
B. $54,880.
C. $34,880.
D. $92,000.
A. $41,800
B. $32,000.
C. $26,400.
D. $38,000.
113. Question ID: CMA 688 5.9 (Topic: Forecasting Techniques - Learning Curves)
LCB, Inc. is preparing a bid to the Department of the Navy to produce engines for rescue boats. The
company has manufactured these engines for the Navy for the past 3 years, on an exclusive
contract, and has experienced the following costs:
A. $760,800
B. $885,800
C. $608,640
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Section B - Planning, Budgeting, and Forecasting.
Questions
D. $708,640
114. Question ID: ICMA 13.P1.006 (Topic: Forecasting Techniques - Learning Curves)
Langley Corporation is developing a new product that will be manufactured in pairs. The company
recently produced the first two units of this product using 200 hours of direct labor time. If Langley
has a 90% learning curve and uses the cumulative average-time learning model, the total direct
labor time to manufacture the first four units of this new product is
A. 400 hours.
B. 360 hours.
C. 324 hours.
D. 380 hours.
115. Question ID: CMA 1293 4.24 (Topic: Forecasting Techniques - Learning Curves)
The average labor cost per unit for the first batch produced by a new process is $120. The
cumulative average labor cost after the second batch is $72 per product. Using a batch size of 100
and assuming the learning curve continues, the total labor cost of four batches will be
A. $2,592.
B. $4,320.
C. $17,280.
D. $10,368.
116. Question ID: ICMA 10.P1.020 (Topic: Forecasting Techniques - Learning Curves)
A manufacturing firm plans to bid on a special order of 80 units that will be manufactured in lots of 10
units each. The production manager estimates that the direct labor hours per unit will decline by a
constant percentage each time the cumulative quantity of units produced doubles. The quantitative
technique used to capture this phenomenon and estimate the direct labor hours required for the
special order is
A. Learning curve - 20%; average hours per unit for units 201-400 - 3.84 hours.
B. Learning curve - 80%; average hours per unit for units 201-400 - 10.24 hours.
C. Learning curve - 80%; average hours per unit for units 201-400 - 7.68 hours.
D. Learning curve - 20%; average hours per unit for units 201-400 - 10.24 hours.
118. Question ID: ICMA 10.P1.027 (Topic: Forecasting Techniques - Learning Curves)
A manufacturing company required 800 direct labor hours to produce the first lot of four units of a
new motor. Management believes that a 90% learning curve will be experienced over the next four
lots of production. How many direct labor hours will be required to manufacture the next 12 units?
A. 1,792
B. 2,160
C. 1,944
D. 2,016
A. $608,640.
B. $760,800.
C. $708,640.
D. $885,800.
120. Question ID: CMA 1288 5.20 (Topic: Forecasting Techniques - Learning Curves)
Moss Point Manufacturing recently completed and sold an order of 50 units that had costs as
follows.
A. $9,800.
B. $14,000.
C. $1,647.
D. $6,860.
122. Question ID: ICMA 10.P1.019 (Topic: Forecasting Techniques - Learning Curves)
Aerosub Inc. has developed a new product for spacecraft that includes the manufacturing of a
complex part. The manufacturing of this part requires a high degree of technical skill. Management
believes there is a good opportunity for its technical force to learn and improve as they become
accustomed to the production process. The production of the first unit requires 10,000 direct labor
hours. If an 80% learning curve is used and eight units are produced, the cumulative average direct
labor hours required per unit of the product will be
A. 6,400 hours
B. 5,120 hours.
C. 8,000 hours.
D. 10,000 hours.
A. 0.71.
B. 0.29.
C. 0.40.
D. 0.60.
124. Question ID: CMA 691 4.2 (Topic: Forecasting Techniques - Probability)
The Booster Club at Blair College sells hot dogs at home basketball games. The group has a
frequency distribution of the demand for hot dogs per game and plans to apply the expected value
decision rule to determine the number of hot dogs to stock.
The Booster Club should select the demand level that:
Percentage expected
Vendor Price per switch
to pass the test
P $35 90%
Q $37 94%
R $39 97%
S $40 99%
Which vendor should Denton's controller recommend to management?
A. Vendor R.
B. Vendor P.
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Section B - Planning, Budgeting, and Forecasting.
Questions
C. Vendor S.
D. Vendor Q.
A. Alternative #1.
B. Alternative #2.
C. Alternative #3.
D. Alternative #4.
127. Question ID: CMA 690 5.17 (Topic: Forecasting Techniques - Probability)
Stan Berry is considering selling peanuts at the Keefer High School football games. The peanuts
would cost $.50 per bag and could be sold for $1.50 per bag. No other costs would be incurred to
sell the peanuts. All unsold bags can be returned to the supplier for $.30 each. Berry estimated the
demand for peanuts at each football game and constructed the payoff table that follows.
A. 30.
B. 50.
C. 20.
128. Question ID: CMA 1289 5.24 (Topic: Forecasting Techniques - Probability)
The College Honor Society sells hot pretzels at the home football games.
The frequency distribution of the demand for pretzels per game is presented as follows:
A. $2,800.
B. $3,500.
C. $4,025.
D. $(1,225).
A. $3,000,000.
B. $3,280,000.
C. $5,300,000.
D. $4,000,000.
131. Question ID: CMA 692 4.4 (Topic: Forecasting Techniques - Probability)
The expected monetary value of an event
A. Is equal to the payoff of the event times the probability the event will occur.
B. Cannot be computed when there is uncertainty associated with the event.
C. Is the absolute profit from a particular event.
D. Is the profit forgone by not choosing the best alternative.
Demand Probability
200,000 0.4
300,000 0.3
400,000 0.2
500,000 0.1
Ignoring the time value of money, the expected cost of using the semi-automatic machine is
A. $210,000.
B. $130,000.
C. $250,000.
D. $170,000.
133. Question ID: CMA 1280 5.15 (Topic: Forecasting Techniques - Probability)
A car rental agency has a policy of replacing the tires on its car fleet as the tires wear out.
Management wonders if there would be any cost savings if the tires are periodically replaced at one
time on its fleet of 500 cars. The technique the car rental agency would find most useful is
A. $46,500.
B. $53,000.
C. $93,000.
D. $6,500.
135. Question ID: CMA 1286 5.3 (Topic: Forecasting Techniques - Probability)
Expected value in decision analysis is
A. 10%.
B. 19%.
C. 16%.
D. 12%.
A. 15,000
B. 12,000
C. 8,000
D. 10,000
138. Question ID: CMA 1286 5.2 (Topic: Forecasting Techniques - Probability)
Decisions are frequently classified as those made under certainty and those made under
uncertainty. Certainty exists when
140. Question ID: CMA 683 5.8 (Topic: Forecasting Techniques - Probability)
A company is simulating the actions of a government agency in which 50% of the time a recall of a
product is required, 40% of the time only notification of the buyer about a potential defect is required,
and 10% of the time no action on its part is required. Random numbers of 1 to 100 are being used.
An appropriate assignment of random numbers for the recall category would be
A. 61-100.
B. 1-40.
C. 11-60.
D. 40-90.
141. Question ID: CMA 1289 5.23 (Topic: Forecasting Techniques - Probability)
The College Honor Society sells hot pretzels at the home football games.
The frequency distribution of the demand for pretzels per game is presented as follows:
A. $2,100.
B. $1,200.
C. Some amount other than those given.
D. $2,800.
A. 2%
B. 33%
C. 50%
D. 17%
143. Question ID: CMA 1292 4.21 (Topic: Forecasting Techniques - Probability)
A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks
and the weather is hot, it will make $2,500; if the weather is cold, the profit will be $1,000. If the
stand sells coffee and the weather is hot, it will make $1,900; if the weather is cold, the profit will be
$2,000. The probability of cold weather on a given day at this time is 60%.
The expected payoff for selling coffee is
A. $1,960.
B. $2,200.
C. $3,900.
D. $1,360.
144. Question ID: CMA 688 5.25 (Topic: Forecasting Techniques - Probability)
A computer store sells four computer models designated as P104, X104, A104 and S104. The store
manager has made random number assignments to represent customer choices based on past
sales data. The assignments are:
Contribution
Margin
If sales are excellent and
Plan 1 is adopted $300,000
Plan 2 is adopted 370,000
A. $110,000.
B. $500,000.
C. $380,000.
D. $166,667.
148. Question ID: CMA 689 5.28 (Topic: Forecasting Techniques - Probability)
Refer to the profit payoff table below.
Demand in Units
0 2 4 6
Probability of Demand
Supply in Units 0.1 0.3 0.4 0.2
0 $ 0 $ 0 $ 0 $ 0
2 (80) 40 40 40
4 (160) (40) 80 80
6 (240) (120) 0 120
The expected profit when supply equals 4 units, is
A. $(10)
B. $(40)
C. $20
D. $80
Monthly Sales
Probability Income (Loss)
In Units
10,000 0.2 $(4,000)
20,000 0.3 10,000
30,000 0.3 30,000
40,000 0.2 60,000
If Johnson decides to market its new software package, the expected value of the additional monthly
income will be
A. $40,000
B. $23,200
C. $24,800
D. $24,000
A. $84,000
B. $85,000
C. $67,200
D. $68,000
A. $400,000.
B. $140,000.
C. $100,000.
D. $137,000.
154. Question ID: CMA 1289 5.22 (Topic: Forecasting Techniques - Probability)
The College Honor Society sells hot pretzels at the home football games.
The frequency distribution of the demand for pretzels per game is presented as follows:
A. $2,800.
B. $2,100.
C. $1,800.
D. Some amount other than those given.
Probabilities
Payoffs Investment A Investment B Investment C
$(20,000) 0.3 0.2 0.3
(10,000) 0.1 0.2 0.1
30,000 0.3 0.2 0.2
70,000 0.2 0.2 0.3
100,000 0.1 0.2 0.1
The cost of investments A, B and C are the same. Using the expected-value criterion, which one of
the following rankings of these investments, from highest payoff to lowest payoff, is correct?
A. C, A, B.
B. B, A, C.
C. A, B, C.
D. B, C, A.
156. Question ID: CMA 689 5.27 (Topic: Forecasting Techniques - Probability)
A company is considering three alternative machines to produce a new product. The cost structures
(unit variable costs plus avoidable fixed costs) for the three machines are shown as follows. The
selling price is unaffected by the machine used.
Demand Probability
200,000 0.4
300,000 0.3
400,000 0.2
500,000 0.1
Using the expected value criterion,
A. The single purpose machine should be used because of the low expected demand.
B. The automatic machine has the lowest expected cost.
C. The automatic machine should be used because of the high expected demand.
D. The semi-automatic machine should be used because it has the lowest expected cost.
Budget Methodologies
157. Question ID: ICMA 19.P1.026 (Topic: Budget Methodologies)
The type of budget that is continually updated to add a new budget period as the most recent budget
period is completed is called a(n)
A. activity-based budget.
B. flexible budget.
C. zero-based budget.
D. rolling budget.
A. $5,000.
B. $1,500.
C. $3,000.
D. $3,500.
A. $40,500.
B. $40,850.
C. $39,216.
D. $43,000.
A. Flexible budgeting.
B. Project budgeting.
C. Activity-based budgeting.
D. Zero-based budgeting.
A. Activity-based budgeting.
B. Rolling/continuous budgeting.
C. Flexible budgeting.
D. Project budgeting.
A. €86,250.
B. €91,875.
C. €42,500.
D. €105,000.
A. Flexible budget.
B. Static budget.
C. Zero-base budget.
D. Capital budget.
A. Flexible budget.
B. Rolling budget.
C. Zero-based budget.
D. Activity-based budget.
Planned Actual
Sales orders 800 780
Shipments 800 820
Units shipped 8,000 9,000
Sales $120,000 $144,000
Total pounds shipped 9,600 12,300
The actual shipping costs for the month amounted to $21,000. The appropriate monthly flexible
budget allowance for shipping costs for the purpose of performance evaluation would be
A. $20,800
B. $20,680
C. $20,920
D. $22,150
A. $13,500.
B. $13,975.
C. $13,000.
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Section B - Planning, Budgeting, and Forecasting.
Questions
D. $11,700.
A. Divides the activities of individual responsibility centers into a series of packages that are
prioritized.
B. Presents the plan for only one level of activity and does not adjust to changes in the level of
activity.
C. Presents a statement of expectations for a period of time but does not present a firm commitment.
D. Classifies budget requests by activity and estimates the benefits arising from each activity.
A. A flexible budget provides cost allowances for different levels of activity, whereas a static budget
provides costs for one level of activity.
B. A flexible budget is established by operating management, while a static budget is determined by
top management.
C. A flexible budget includes only variable costs, whereas a static budget includes only fixed costs.
D. A flexible budget primarily is prepared for planning purposes, while a static budget is prepared for
performance evaluation.
A. is developed for the actual level of output achieved for the budget period.
B. projects costs on the basis of future improvements in existing practices and procedures during a
budget period.
C. is comprised of the budgeted income statement and its supporting schedules for a budget period.
D. focuses on the costs of activities necessary to produce and sell products and services for a
budget period.
A. assumes all activities are legitimate and worthy of receiving budget increases to cover any
increased costs.
B. focuses on planned capital outlays for property, plant, and equipment.
C. questions each activity and determines whether it should be maintained as it is, reduced, or
eliminated.
D. takes the previous year's budgets and adjusts them for inflation.
A. $21,500.
B. $19,475.
C. $20,425.
D. $20,500.
A. an imposed budget.
B. a static budget.
C. incremental budgeting.
D. zero-base budgeting.
Revenue $2,400,000
Direct materials 675,000
Direct labor 300,000
Variable overhead 450,000
Contribution $ 975,000
Fixed overhead 250,000
Fixed selling/administration 500,000
Operating income $ 225,000
Actual sales during November were 180,000 games. Using a flexible budget, the company expects
the operating income for the month of November to be
A. $420,000.
B. $270,000.
C. $225,000.
D. $510,000.
A. $715,000.
B. $695,000.
C. $650,000.
D. $450,000.
A. Presents planned activities for a period but does not present a firm commitment.
B. Drops the current month or quarter and adds a future month or quarter as the current month or
quarter is completed.
C. Presents the plan for a range of activity so that the plan can be adjusted for changes in activity.
D. Presents the plan for only one level of activity and does not adjust to changes in the level of
activity.
Sales are budgeted at $220,000 for December year 1 and $200,000 for January year 2.
Collections are expected to be 60% in the month of sale and 38% in the month following the
sale.
Gross margin is 25% of sales.
A total of 80% of the merchandise held for resale is purchased in the month prior to the
month of sale and 20% is purchased in the month of sale. Payment for merchandise is made
in the month following the purchase.
Other expected monthly expenses to be paid in cash are $22,600.
Annual depreciation is $216,000.
Below is Kelly Company's statement of financial position at November 30, year 1.
Assets
Cash $22,000
Accounts receivable
(net of $4,000 allowance for uncollectible accounts) 76,000
Inventory 132,000
Property, plant, and equipment
(net of $680,000 accumulated depreciation) 870,000
Total assets $1,100,000
Liabilities and Stockholders' Equity
Accounts payable $162,000
Common stock 800,000
Retained earnings 138,000
Total liabilities and stockholders' equity $1,100,000
The budgeted income (loss) before income taxes for December year 1 is
A. $28,000.
B. $10,000.
C. Some amount other than those given.
D. $32,400.
A. assumes all activities are legitimate and worthy of receiving budget increases to cover any
increased costs.
B. uses the previous year's budget and adjusts it for inflation.
C. focuses on planned capital outlays for property, plant, and equipment.
D. evaluates each activity and determines whether it should be maintained as it is, reduced, or
eliminated.
Annual budgeted fixed costs for normal capacity level of 10,000 articles reviewed and edited:
$600,000
Standard professional hours per 10 articles: 200 hours
Flexible budget of standard labor costs to process 10,000 articles: $10,000,000
The following data apply to the 9,500 articles that were actually reviewed and edited during the
current year:
A. $10,570,000.
B. $9,500,000.
C. $10,100,000.
D. $10,070,000.
A. Incremental budgeting.
B. Zero-base budgeting.
C. Program budgeting.
D. Performance budgeting.
A. Budgeting from the ground up as though the budget process were being initiated for the first time.
B. Developing budgeted costs from clear-cut measured relationships between inputs and outputs.
C. Using the prior year's budget as a base year and adjusting it based on the experiences of the
prior year and the expectations for the coming year.
D. Budgeting for cash inflows and outflows to time investments and borrowings in a way to maintain
a bank account with a minimum balance.
Sales $4,000,000
Gross margin (based on sales) 25%
Decrease in inventories $160,000
Decrease in accounts payable for inventories $275,000
The estimated cash disbursements for inventories were
A. $3,115,000.
B. $2,565,000.
C. $3,275,000.
D. $2,840,000.
188. Question ID: ICMA 19.P1.024 (Topic: Annual Profit Plan and Supporting Schedules)
A company is developing its budget for the upcoming month. The financial planning department has
developed the following range of sales activity and the associated probabilities for each level of
budgeted sales.
A. $168,000
B. $134,400
C. $136,000
D. $170,000
Forecasted Sales
June $700,000
July 600,000
August 650,000
September 800,000
October 850,000
November 900,000
December 840,000
Types of Sales
Cash sales 30%
Credit sales 70%
Collection pattern on credit sales
(5% determined to be uncollectible)
During the month of sale 20%
During the first month following the sale 50%
During the second month following the sale 25%
Johnsen's budgeted cash receipts from sales and collections on account for September are
A. $827,000.
B. $635,000.
C. $684,500.
D. $807,000.
Quarter Units
1 10,000
2 8,000
3 12,000
4 14,000
Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the
next quarter's sales. Budgeted production for the second quarter of the next year would be:
A. 7,200 units.
B. 8,800 units.
C. 8,000 units.
D. 8,400 units.
191. Question ID: CMA 691 3.11 (Topic: Annual Profit Plan and Supporting Schedules)
When budgeting, the items to be considered by a manufacturing firm in going from a sales quantity
budget to a production budget would be the
192. Question ID: ICMA 10.P1.077 (Topic: Annual Profit Plan and Supporting Schedules)
Monroe Products is preparing a cash forecast based on the following information.
A. $75,000.
B. $60,000.
C. $70,000.
D. $80,000.
A. Capital budget.
B. Production budget.
C. Materials budget.
D. Sales budget.
194. Question ID: CMA 692 3.27 (Topic: Annual Profit Plan and Supporting Schedules)
Esplanade Company has the following historical pattern for its credit sales:
July $60,000
August 70,000
September 80,000
October 90,000
November 100,000
December 85,000
The estimated total cash collections during October from accounts receivable would be
A. $63,000.
B. $21,400.
C. $84,400.
D. $86,700.
A. $174,500.
B. $228,500.
C. $129,050.
D. $211,500.
196. Question ID: CIA 1190 IV.15 (Topic: Annual Profit Plan and Supporting Schedules)
A company has budgeted sales of 24,000 finished units for the forthcoming 6-month period. It takes
4 pounds of direct materials to make one finished unit. Given the following:
Direct Materials
Finished Units (pounds)
Beginning inventory 14,000 44,000
Target ending inventory 12,000 48,000
How many pounds of direct materials should be budgeted for purchase during the 6-month period?
A. 88,000
B. 92,000
C. 48,000
D. 100,000
Units at Units at
Part No.
April 1 April 30
C-14 12,000 10,000
A-9 21,000 9,000
B-6 32,000 10,000
D-28 14,000 6,000
The C-14 production budget for April should be based on the manufacture of
A. 400,000 units.
B. 424,000 units.
C. 390,000 units.
D. 402,000 units.
198. Question ID: CMA 694 H2 (Topic: Annual Profit Plan and Supporting Schedules)
The production budget process usually begins with the
Sales On
Month
Open Account
January $70,000
February 90,000
March 100,000
April 120,000
May 100,000
June 90,000
The estimated total cash collections during April from accounts receivable would be
A. $118,800
B. $84,000
C. $108,000
D. $110,800
200. Question ID: CIA 594 III.69 (Topic: Annual Profit Plan and Supporting Schedules)
A company produces a product that requires 2 pounds of a raw material. The company forecasts
that there will be 6,000 pounds of raw material on hand at the end of June. At the end of any given
month the company wishes to have 30% of next month's raw material requirements on hand. The
company has budgeted production of the product for July, August, September, and October to be
10,000, 12,000, 13,000, and 11,000 units, respectively. As of June 1, the raw material sells for $1.00
per pound.
In the month of September, raw material purchases and ending inventory, respectively, will be (in
pounds):
A. Require development of a production budget after receiving the division's projected sales
forecast.
B. Be negligible.
C. Require development of a production budget that is forwarded to the Budget Department.
D. Require development of a production budget based on the prior year's manufacturing activity.
202. Question ID: ICMA 10.P1.069 (Topic: Annual Profit Plan and Supporting Schedules)
Tut Company's selling and administrative costs for the month of August, when it sold 20,000 units,
were as follows.
Costs
Per Unit Total
Variable costs $18.60 $372,000
Step costs 4.25 85,000
Fixed costs 8.80 176,000
Total selling and administrative costs $31.65 $633,000
The variable costs represent sales commissions paid at the rate of 6.2% of sales. The step costs
depend on the number of salespersons employed by the company. In August there were 17 persons
on the sales force. However, two members have taken early retirement effective August 31. It is
anticipated that these positions will remain vacant for several months. Total fixed costs are
unchanged within a relevant range of 15,000 to 30,000 units per month. Tut is planning a sales price
cut of 10%, which it expects will increase sales volume to 24,000 units per month. If Tut implements
the sales price reduction, the total budgeted selling and administrative costs for the month of
September would be
A. $652,760.
B. $714,960.
C. $759,600.
D. $679,760.
January $300,000
February 340,000
March 370,000
April 390,000
The company bills each month's sales on the last day of the month.
Receivables are booked gross and credit terms of sale are: 2/10, n/30.
50% of the billings are collected within the discount period, 30% are collected by the end of
the month, 15% are collected by the end of the second month, and 5% become uncollectible.
Budgeted cash collections for Wallstead company during April would be
A. $347,000.
B. $349,300
C. $353,000.
D. $343,300.
Sales On
Month Open Account
January $70,000
February 90,000
March 100,000
April 120,000
May 100,000
June 90,000
The estimated total cash collections during the second calendar quarter from sales made on open
account during the second calendar quarter would be
A. $288,800
B. $306,900
C. $310,000
D. $262,000
Putter Heads
Forged Laminated
Raw materials:
Steel 2 pounds @ $5/pound 1 pound @ $5/pound
Copper None 1 pound @ $15/pound
Direct labor 1/4 hour @ $20/hour 1 hour @ $22/hour
Expected sales (units) 8,200 2,000
Selling price per unit $30 $80
Ending inventory target (units) 100 60
Beginning inventory (units) 300 60
Beginning inventory (cost) $5,250 $3,120
Manufacturing overhead is applied to units produced on the basis of direct labor hours. Variable
manufacturing overhead is projected to be $25,000, and fixed manufacturing overhead is expected
to be $15,000.
The estimated cost to produce one unit of the laminated putter head is
A. $46.
B. $52.
C. $42.
D. $62.
206. Question ID: ICMA 1603.P1.020 (Topic: Annual Profit Plan and Supporting Schedules)
A company operates on a calendar year but maintains four continuous quarterly budgets for up-to-
date budget information. After completing its five-year long-term plan, the company’s management
decided to make a capital investment in new equipment. The equipment is expected to have a useful
life of nine years. Which one of the following is the most appropriate time period for the capital
budget for the evaluation of the capital investment?
A. 38,200 pounds.
B. 114,600 pounds.
C. 43,200 pounds.
D. 30,600 pounds.
208. Question ID: CMA 1291 3.24 (Topic: Annual Profit Plan and Supporting Schedules)
Information pertaining to Noskey Corporation's sales revenue is presented in the following table.
A. $239,400.
B. $299,400.
C. $294,000.
D. $240,000.
A. Ascertain which capital expenditure projects are feasible and which capital expenditure projects
should be deferred.
B. Avoid the opportunity costs of non-invested excess cash and minimize the cost of interim
financing.
C. Support the preparation of its cash flow statement for the annual report.
D. Determine the opportunity costs of alternative sales and production strategies.
210. Question ID: CMA 1293 3.11 (Topic: Annual Profit Plan and Supporting Schedules)
Superflite expects April sales of its deluxe model airplane, the C-14, to be 402,000 units at $11 each.
Each C-14 requires three purchased components shown below.
Units at Units at
Part No.
April 1 April 30
C-14 12,000 10,000
A-9 21,000 9,000
B-6 32,000 10,000
D-28 14,000 6,000
Assume Superflite plans to manufacture 400,000 units in April. Superflite's April budget for the
purchase of A-9 should be
A. 388,000 units.
B. 402,000 units.
C. 412,000 units.
D. 379,000 units.
212. Question ID: ICMA 10.P1.060 (Topic: Annual Profit Plan and Supporting Schedules)
Manoli Gift Shop maintains a 35% gross profit margin percentage and carries an ending inventory
balance each month sufficient to support 30% of the next month's expected sales. Anticipated sales
for the fourth quarter are as follows.
October $42,000
November 58,000
December 74,000
What amount of goods should Manoli Gift Shop plan to purchase during the month of November?
A. $52,130.
B. $40,820.
C. $51,220.
D. $62,800.
Sales are budgeted at $220,000 for December year 1 and $200,000 for January year 2.
Collections are expected to be 60% in the month of sale and 38% in the month following the
sale.
Gross margin is 25% of sales.
A total of 80% of the merchandise held for resale is purchased in the month prior to the
month of sale and 20% is purchased in the month of sale. Payment for merchandise is made
in the month following the purchase.
Other expected monthly expenses to be paid in cash are $22,600.
Annual depreciation is $216,000.
Below is Kelly Company's statement of financial position at November 30, year 1.
Assets
Cash $22,000
Accounts receivable
(net of $4,000 allowance for uncollectible accounts) 76,000
Inventory 132,000
Property, plant, and equipment
(net of $680,000 accumulated depreciation) 870,000
Total assets $1,100,000
Liabilities and Stockholders' Equity
Accounts payable $162,000
Common stock 800,000
Retained earnings 138,000
Total liabilities and stockholders' equity $1,100,000
The projected balance in inventory on December 31, year 1 is
A. $150,000.
B. $120,000.
C. $153,000.
D. $160,000.
July $460,000
August 500,000
September 525,000
October 500,000
November 480,000
December 450,000
20% of Bootstrap's sales are for cash. The balance is subject to the collection pattern shown below.
A. $279,300.
B. $367,500.
C. $360,000
D. $294,000.
215. Question ID: ICMA 1603.P1.015 (Topic: Annual Profit Plan and Supporting Schedules)
Which one of the following would cause a company’s production budget to decrease?
Cash Receipts
January February March
December receivables $32,000
From January sales 54,000 $36,000
From February sales 66,000 $44,000
From March sales 72,000
Other information includes the following:
A. $23,000.
B. $8,000.
C. $10,600.
D. $11,000.
A. $198,000
B. $216,000
C. $207,000
D. $180,000
218. Question ID: CIA 589 IV.12 (Topic: Annual Profit Plan and Supporting Schedules)
A company has $10,000 in cash and $150,000 in merchandise inventory on March 31. The desired
cash and merchandise inventory balances on June 30 are $20,000 and $250,000, respectively.
Sales for the quarter are expected to be $300,000, all in cash. Gross margin is 40% of sales. Cash
operating expenses are expected to be $50,000. All merchandise inventory purchases are paid for in
cash at the time of purchase. What amount of financing will the company need during the quarter?
A. $30,000
B. $40,000
C. $50,000
D. $20,000
Sales are budgeted at $220,000 for December year 1 and $200,000 for January year 2.
Collections are expected to be 60% in the month of sale and 38% in the month following the
sale.
Gross margin is 25% of sales.
A total of 80% of the merchandise held for resale is purchased in the month prior to the
month of sale and 20% is purchased in the month of sale. Payment for merchandise is made
in the month following the purchase.
Other expected monthly expenses to be paid in cash are $22,600.
Annual depreciation is $216,000.
Below is Kelly Company's statement of financial position at November 30, year 1.
Assets
Cash $22,000
Accounts receivable
(net of $4,000 allowance for uncollectible accounts) 76,000
Inventory 132,000
Property, plant, and equipment
(net of $680,000 accumulated depreciation) 870,000
Total assets $1,100,000
Liabilities and Stockholders' Equity
Accounts payable $162,000
Common stock 800,000
Retained earnings 138,000
Total liabilities and stockholders' equity $1,100,000
The budgeted cash collections for December year 1 are
A. $203,600.
B. $212,000.
C. $208,000.
D. $132,000.
July 2,300
August 2,500
September 2,100
Rokat's ending inventories in units for June 30 are
A. 9,400 legs.
B. 2,200 legs.
C. 6,400 legs.
D. 6,520 legs.
A. $127,500
B. $327,000
C. $113,500
D. $390,000
Estimated Type of
Month
Monthly Sales Monthly Sale
January $600,000
February 650,000
March 700,000 All Months:
Cash sales 20%
April 625,000 Credit sales 80%
May 720,000
June 800,000
Collection Pattern for Credit Sales
Advertising $720,000
Depreciation 420,000
Insurance 180,000
Property taxes 240,000
Salaries 1,080,000
The amount for cost of goods sold that will appear on Karmee Company's budgeted income
statement for the month of February will be
A. $260,000
B. $195,000
C. $272,000
D. $254,000
Sales are budgeted at $220,000 for December year 1 and $200,000 for January year 2.
Collections are expected to be 60% in the month of sale and 38% in the month following the
sale.
Gross margin is 25% of sales.
A total of 80% of the merchandise held for resale is purchased in the month prior to the
month of sale and 20% is purchased in the month of sale. Payment for merchandise is made
in the month following the purchase.
Other expected monthly expenses to be paid in cash are $22,600.
Annual depreciation is $216,000.
Below is Kelly Company's statement of financial position at November 30, year 1.
Assets
Cash $22,000
Accounts receivable
(net of $4,000 allowance for uncollectible accounts) 76,000
Inventory 132,000
Property, plant, and equipment
(net of $680,000 accumulated depreciation) 870,000
Total assets $1,100,000
Liabilities and Stockholders' Equity
Accounts payable $162,000
Common stock 800,000
Retained earnings 138,000
Total liabilities and stockholders' equity $1,100,000
The projected balance in accounts payable on December 31, year 1 is
A. $162,000.
B. $204,000.
C. Some amount other than those given.
D. $153,000.
Collections. 50% of the current month's sales budget and 50% of the previous month's sales
budget.
Accounts Payable Disbursements. 75% of the current month's accounts payable budget and
25% of the previous month's accounts payable budget.
All other disbursements occur in the month in which they are budgeted.
Budget Information
A. A need to borrow $50,000 on its line of credit for the cash deficit.
B. A need to borrow $100,000 on its line of credit for the cash deficit.
C. A need to borrow $90,000 on its line of credit for the cash deficit.
D. $45,000 in excess cash.
225. Question ID: CMA 691 1.9 (Topic: Annual Profit Plan and Supporting Schedules)
The most direct way to prepare a cash budget for a manufacturing firm is to include
A. $40,000
B. $21,000
C. $84,000
D. $42,000
227. Question ID: CMA 1294 H5 (Topic: Annual Profit Plan and Supporting Schedules)
When sales volume is seasonal in nature, certain items in the budget must be coordinated. The
three most significant items to coordinate in budgeting seasonal sales volume are
Super Drive
Statement of Financial Position
November 30
Assets
Cash $ 52,000
Accounts receivable, net. 150,000
Inventory 315,000
Property, plant and equipment 1,000,000
Total assets $1,517,000
Liabilities and Equity
Accounts payable $ 175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and shareholders equity $1,517,000
Additional information regarding Super Drive's operations include the following:
Sales are budgeted at $520,000 for December and $500,000 for January of the next year.
Collections are expected to be 60% in the month of sale and 40% in the month following the
sale.
80% of the disk drive components are purchased in the month prior to the month of sale, and
20% are purchased in the month of sale. Purchased components are 40% of the cost of
goods sold.
Payment for the components is made in the month following the purchase.
Cost of goods sold is 80% of sales.
The projected balance in accounts payable on December 31 is
A. $416,000
B. $161,280
C. $166,400
D. $326,400
A. 14,500 units.
B. 16,500 units.
C. 54,000 units.
D. 45,000 units.
Super Drive
Statement of Financial Position
November 30
Assets
Cash $ 52,000
Accounts receivable, net. 150,000
Inventory 315,000
Property, plant and equipment 1,000,000
Total assets $1,517,000
Liabilities and Equity
Accounts payable $ 175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and shareholders equity $1,517,000
Additional information regarding Super Drive's operations include the following:
Sales are budgeted at $520,000 for December and $500,000 for January of the next year.
Collections are expected to be 60% in the month of sale and 40% in the month following the
sale.
80% of the disk drive components are purchased in the month prior to the month of sale, and
20% are purchased in the month of sale. Purchased components are 40% of the cost of
goods sold.
Payment for the components is made in the month following the purchase.
Cost of goods sold is 80% of sales.
The budgeted cash collections for the month of December are
A. $208,000
B. $462,000
C. $520,000
D. $402,000
A. 95,000.
B. 90,000.
C. 85,000.
D. 135,000.
232. Question ID: ICMA 1603.P1.029 (Topic: Annual Profit Plan and Supporting Schedules)
Which one of the following is in a company’s cash budget?
233. Question ID: CMA 691 3.9 (Topic: Annual Profit Plan and Supporting Schedules)
In developing a comprehensive annual budget for a manufacturing company, which one of the
following items should be done first?
234. Question ID: ICMA 10.P1.048 (Topic: Annual Profit Plan and Supporting Schedules)
Hannon Retailing Company prices its products by adding 30% to its cost. Hannon anticipates sales
of $715,000 in July, $728,000 in August, and $624,000 in September. Hannon's policy is to have on
hand enough inventory at the end of the month to cover 25% of the next month's sales. What will be
the cost of the inventory that Hannon should budget for purchase in August?
A. $680,000
B. $560,000
C. $540,000
D. $509,600
A. $7 million.
B. $0.
C. $2 million.
D. $26 million.
236. Question ID: CMA 697 3.14 (Topic: Annual Profit Plan and Supporting Schedules)
Jordan Auto has developed the following production plan:
Month
January 10,000
February 8,000
March 9,000
April 12,000
Each unit contains 3 pounds of raw material. The desired raw material ending inventory each month
is 120% of the next month's production, plus 500 pounds. (The beginning inventory meets this
requirement.) Jordan has developed the following direct labor standards for production of these
units:
Department 1 Department 2
Hours per unit 2.0 0.5
Hourly rate $6.75 $12.00
How much raw material should Jordan Auto purchase in March?
A. 27,000 pounds.
B. 36,000 pounds.
C. 32,900 pounds.
D. 37,800 pounds.
237. Question ID: CMA 1294 H2 (Topic: Annual Profit Plan and Supporting Schedules)
Of the following items, the one item that would not be considered in evaluating the adequacy of the
budgeted annual operating income for a company is
Estimated Type of
Month
Monthly Sales Monthly Sale
January $600,000
February 650,000
March 700,000 All Months:
Cash sales 20%
April 625,000 Credit sales 80%
May 720,000
June 800,000
Collection Pattern for Credit Sales
Advertising $720,000
Depreciation 420,000
Insurance 180,000
Property taxes 240,000
Salaries 1,080,000
The purchase of merchandise that Karmee Company will need to make during February will be
A. $254,000
B. $338,000
C. $266,000
D. $260,000
January $220,000
February 240,000
March 250,000
April 230,000
May 260,000
Sales for June are projected to be $255,000. Based on this information, the expected cash receipts
for March would be
A. $242,000.
B. $237,400.
C. $243,200.
D. $230,000.
240. Question ID: ICMA 10.P1.078 (Topic: Annual Profit Plan and Supporting Schedules)
Prudent Corporation's budget for the upcoming accounting period reveals total sales of $700,000 in
April and $750,000 in May. The sales cash collection pattern is
A. $737,500.
B. $702,500.
C. $560,000.
D. $735,000.
Cash $100,000
Accounts receivable 300,000
Accounts payable (Inventory) 500,000
Given the above information, the projected change in cash during the coming quarter will be
A. $300,000.
B. $112,500.
C. $412,500.
D. $ -0-
242. Question ID: CMA 692 3.26 (Topic: Annual Profit Plan and Supporting Schedules)
Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in
sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of
the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Each
unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are
800,000 pounds of direct materials in inventory on June 30.
Assume Berol Company plans to produce 600,000 units of finished product in the 3-month period
ending September 30, and to have direct materials inventory on hand at the end of the 3-month
period equal to 25% of the use in that period. The estimated cost of direct materials purchases for
the 3-month period ending September 30 is
A. $2,200,000.
B. $2,640,000.
C. $2,880,000.
D. $2,400,000.
243. Question ID: CMA 1294 3.9 (Topic: Annual Profit Plan and Supporting Schedules)
Super Drive, a computer disk storage and back-up company, uses accrual accounting. The
company's Statement of Financial Position for the year ended November 30, is as follows:
Super Drive
Statement of Financial Position
November 30
Assets
Cash $ 52,000
Accounts receivable, net. 150,000
Inventory 315,000
Property, plant and equipment 1,000,000
Total assets $1,517,000
Liabilities and Equity
Accounts payable $ 175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and shareholders equity $1,517,000
Additional information regarding Super Drive's operations include the following:
Sales are budgeted at $520,000 for December and $500,000 for January of the next year.
Collections are expected to be 60% in the month of sale and 40% in the month following the
sale.
80% of the disk drive components are purchased in the month prior to the month of sale, and
20% are purchased in the month of sale. Purchased components are 40% of the cost of
goods sold.
Payment for the components is made in the month following the purchase.
Cost of goods sold is 80% of sales.
The projected gross profit for the month ending December 31 is
A. $536,000
B. $104,000
C. $416,000
D. $134,000
245. Question ID: CMA 692 3.8 (Topic: Annual Profit Plan and Supporting Schedules)
The budget that is usually the most difficult to forecast is the
A. Sales budget.
B. Manufacturing overhead budget.
C. Production budget.
D. Expense budget.
246. Question ID: CMA 696 H5 (Topic: Annual Profit Plan and Supporting Schedules)
Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and
$198,000 for September. Collection experience indicates that 60% of the budgeted sales will be
collected the month after the sale, 36% will be collected the second month, and 4% will be
uncollectible. The cash receipts from accounts receivable that should be budgeted for September
would be
A. $197,880
B. $147,960
C. $194,760
D. $169,800
Estimated Type of
Month
Monthly Sales Monthly Sale
January $600,000
February 650,000
March 700,000 All Months:
Cash sales 20%
April 625,000 Credit sales 80%
May 720,000
June 800,000
Collection Pattern for Credit Sales
Advertising $720,000
Depreciation 420,000
Insurance 180,000
Property taxes 240,000
Salaries 1,080,000
The total cash disbursements that Karmee Company will make for the operating expenses
(expenses other than the cost of goods sold) during the month of April will be
A. $290,000
B. $385,000
C. $255,000
248. Question ID: ICMA 10.P1.058 (Topic: Annual Profit Plan and Supporting Schedules)
Over the past several years, McFadden Industries has experienced the following regarding the
company's shipping expenses.
A. $20,000.
B. $20,800.
C. $4,800.
D. $16,000.
249. Question ID: ICMA 10.P1.051 (Topic: Annual Profit Plan and Supporting Schedules)
Savior Corporation assembles backup tape drive systems for home microcomputers. For the first
quarter, the budget for sales is 67,500 units. Savior will finish the fourth quarter of last year with an
inventory of 3,500 units, of which 200 are obsolete. The target ending inventory is 10 days of sales
(based upon 360 days). What is the budgeted production for the first quarter?
A. 71,500
B. 71,700
C. 64,350
D. 75,000
A. $168,000
B. $405,000
C. $283,500
D. $220,500
July 2,300
August 2,500
September 2,100
Rokat's ending inventories in units for June 30 are
A. 1,440 tables.
B. 2,340 tables.
C. 1,900 tables.
D. 1,400 tables.
A. 4,000
B. 4,300
C. 3,700
D. 4,600
253. Question ID: CMA 697 3.21 (Topic: Annual Profit Plan and Supporting Schedules)
The Yummy Dog Bone Company is anticipating that a major supplier might experience a strike this
year. Because of the nature of the product and emphasis on quality, extra production cannot be
stored as finished goods inventory. When developing a contingency budget that would anticipate a
raw material buildup, the two most significant items that will be affected are
254. Question ID: CMA 1296 H3 (Topic: Annual Profit Plan and Supporting Schedules)
Which one of the following items is the last schedule to be prepared in the normal budget
preparation process?
A. Cash budget.
B. Manufacturing overhead budget.
C. Cost of goods sold budget.
D. Selling expense budget.
A. Financial budget.
B. Income statement.
C. Balance sheet.
D. Sales budget.
256. Question ID: CMA 1291 H2 (Topic: Annual Profit Plan and Supporting Schedules)
A planning calendar in budgeting is the
257. Question ID: CMA 1294 3.18 (Topic: Annual Profit Plan and Supporting Schedules)
Simpson Inc. is in the process of preparing its annual budget. The following beginning and ending
inventory levels (in units) are planned for the year ending December 31.
Beginning Ending
Inventory Inventory
Raw material* 40,000 50,000
Work-in-process 10,000 10,000
Finished goods 80,000 50,000
*Two units of raw material are needed to produce each unit of finished product.
If 500,000 finished units were to be manufactured for the year by Simpson Inc., the units of raw
material that must be purchased would be
A. 1,010,000 units.
B. 1,000,000 units.
C. 1,020,000 units.
D. 990,000 units.
May $100,000
June 120,000
July 140,000
August 160,000
September 150,000
October 130,000
Normal cash collection experience has been that 50% of sales are collected during the month of sale
and 45% in the month following sale. The remaining 5% of sales is never collected. DeBerg's
budgeted cash collections for the third calendar quarter are
A. $414,000
B. $450,000
C. $427,500
D. $422,500
Estimated Type of
Month
Monthly Sales Monthly Sale
January $600,000
February 650,000
March 700,000 All Months:
Cash sales 20%
April 625,000 Credit sales 80%
May 720,000
June 800,000
Collection Pattern for Credit Sales
Advertising $720,000
Depreciation 420,000
Insurance 180,000
Property taxes 240,000
Salaries 1,080,000
The amount of cash collected in March for Karmee Company from the sales made during March will
be
A. $140,000
B. $168,000
C. $636,000
260. Question ID: CMA 1289 4.8 (Topic: Annual Profit Plan and Supporting Schedules)
The foundation of a profit plan is the
A. Production plan.
B. Capital budget.
C. Sales forecast.
D. Cost and expense budget.
261. Question ID: ICMA 10.P1.041 (Topic: Annual Profit Plan and Supporting Schedules)
What would be the correct chronological order of preparation for the following budgets?
A. II, III, I, IV
B. I, II, III, IV
C. III, II, IV, I
D. IV, II, III, I
262. Question ID: ICMA 10.P1.063 (Topic: Annual Profit Plan and Supporting Schedules)
Maker Distributors has a policy of maintaining inventory at 15% of the next month's forecasted sales.
The cost of Maker's merchandise averages 60% of the selling price. The inventory balance as of
May 31 is $63,000, and the forecasted dollar sales for the last seven months of the year are as
follows:
June $700,000
July 600,000
August 650,000
September 800,000
October 850,000
November 900,000
December 840,000
What is the budgeted dollar amount of Maker's purchases for July?
A. $364,500.
B. $355,500.
263. Question ID: ICMA 1603.P1.009 (Topic: Annual Profit Plan and Supporting Schedules)
Which one of following budgets is regarded as the foundation of the master budget?
A. Sales.
B. Operating.
C. Production.
D. Cash.
264. Question ID: CMA 1293 H2 (Topic: Annual Profit Plan and Supporting Schedules)
The Raymar Company is preparing its cash budget for the months of April and May. The firm has
established a $200,000 line of credit with its bank at a 12% annual rate of interest on which
borrowings for cash deficits must be made in $10,000 increments. There is no outstanding balance
on the line of credit loan on April 1. Principal repayments are to be made in any month in which there
is a surplus of cash. Interest is to be paid monthly. If there are no outstanding balances on the loans,
Raymar will invest any cash in excess of its desired end-of-month cash balance in U.S. Treasury
bills. Raymar intends to maintain a minimum balance of $100,000 at the end of each month by either
borrowing for deficits below the minimum balance or investing any excess cash from operations.
Monthly collection and disbursement patterns are expected to be:
Collections. 50% of the current month's sales budget and 50% of the previous month's sales
budget.
Accounts Payable Disbursements. 75% of the current month's accounts payable budget and
25% of the previous month's accounts payable budget.
All other disbursements occur in the month in which they are budgeted.
Budget Information
265. Question ID: ICMA 08.P2.041 (Topic: Annual Profit Plan and Supporting Schedules)
Tyler Company produces one product and budgeted 220,000 units for the month of August with the
following budgeted manufacturing costs.
A. $4,134,000
B. $3,754,000.
C. $3,974,000
D. $3,930,000
266. Question ID: CMA 692 H7 (Topic: Annual Profit Plan and Supporting Schedules)
Which one of the following may be considered an independent item in the preparation of the master
budget?
Estimated Type of
Month
Monthly Sales Monthly Sale
January $600,000
February 650,000
March 700,000 All Months:
Cash sales 20%
April 625,000 Credit sales 80%
May 720,000
June 800,000
Collection Pattern for Credit Sales
Advertising $720,000
Depreciation 420,000
Insurance 180,000
Property taxes 240,000
Salaries 1,080,000
Karmee Company's total cash receipts for the month of April will be
A. $707,400
B. $653,000
C. $629,000
D. $504,000
A. 7,900.
B. 9,300.
C. 8,700.
D. 2,475.
269. Question ID: ICMA 10.P1.084 (Topic: Annual Profit Plan and Supporting Schedules)
The Mountain Mule Glove Company is in its first year of business. Mountain Mule had a beginning
cash balance of $85,000 for the quarter. The company has a $50,000 short-term line of credit. The
budgeted information for the first quarter is shown below.
A. $10,000.
B. $0.
C. $45,000.
D. $5,000.
January $100,000
February 150,000
March 180,000
Historical trends indicate that 40% of sales are collected during the month of sale, 50% are collected
in the month following the sale, and 10% are collected two months after the sale. Brown's accounts
receivable balance as of December 31 totals $80,000 ($72,000 from December's sales and $8,000
from November's sales.) The amount of cash Brown can expect to collect during the month of
January is
A. $133,000
B. $84,000
C. $76,800.
D. $108,000
271. Question ID: ICMA 10.P1.049 (Topic: Annual Profit Plan and Supporting Schedules)
Streeter Company produces microwave turntables. Sales for the next year are expected to be
65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter,
and 66,000 units in the fourth quarter. Streeter maintains a finished goods inventory at the end of
each quarter equal to one half of the units expected to be sold in the next quarter. How many units
should Streeter produce in the second quarter?
A. 72,000 units
B. 84,000 units
C. 75,000 units
D. 78,000 units
272. Question ID: ICMA 10.P1.062 (Topic: Annual Profit Plan and Supporting Schedules)
Playtime Toys estimates that it will sell 200,000 dolls during the coming year. The beginning
inventory is 12,000 dolls; the target ending inventory is 15,000 dolls. Each doll requires two shoes
which are purchased from an outside supplier. The beginning inventory of shoes is 20,000; the
target ending inventory is 18,000 shoes. The number of shoes that should be purchased during the
year is
A. 404,000 shoes.
B. 402,000 shoes.
C. 396,000 shoes.
D. 398,000 shoes.
A. $2,100,000
B. $2,180,000
C. $2,220,000
D. $2,300,000
274. Question ID: ICMA 10.P1.050 (Topic: Annual Profit Plan and Supporting Schedules)
Ming Company has budgeted sales at 6,300 units for the next fiscal year and desires to have 590
good units on hand at the end of that year. Beginning inventory is 470 units. Ming has found from
past experience that 10% of all units produced do not pass final inspection and must therefore be
destroyed. How many units should Ming plan to produce in the next fiscal year?
A. 6,890.
B. 7,133.
C. 7,186.
D. 7,062.
Month
January 10,000
February 8,000
March 9,000
April 12,000
Each unit contains 3 pounds of raw material. The desired raw material ending inventory each month
is 120% of the next month's production, plus 500 pounds. (The beginning inventory meets this
requirement.) Jordan has developed the following direct labor standards for production of these
units:
Department 1 Department 2
Hours per unit 2.0 0.5
Hourly rate $6.75 $12.00
Jordan Auto's total budgeted direct labor dollars for February usage should be
A. $175,500
B. $156,000
C. $165,750
D. $210,600
276. Question ID: ICMA 10.P1.071 (Topic: Annual Profit Plan and Supporting Schedules)
Myers Company uses a calendar-year and prepares a cash budget for each month of the year.
Which one of the following items should be considered when developing July's cash budget?
A. Property taxes levied in the last calendar year scheduled to be paid quarterly in the coming year
during the last month of each calendar quarter.
B. Federal income tax and social security tax withheld from employees' June paychecks to be
remitted to the Internal Revenue Service in July.
C. Quarterly cash dividends scheduled to be declared on July 15 and paid on August 6 to
shareholders of record as of July 25.
D. Recognition that 0.5% of the July sales on account will be uncollectible.
A. Production budget.
B. Raw materials purchases budget.
C. Schedule of cash receipts and disbursements.
D. Sales forecast.
278. Question ID: ICMA 10.P1.047 (Topic: Annual Profit Plan and Supporting Schedules)
Netco's sales budget for the coming year is as follows.
A. $550,000
B. $750,000
C. $850,000
D. $1,050,000
279. Question ID: CMA 691 3.1 (Topic: Annual Profit Plan and Supporting Schedules)
Wilson Company uses a comprehensive planning and budgeting system. The proper order for
Wilson to prepare certain budget schedules would be:
A. Statement of cash flows, cost of goods sold, income statement, and balance sheet.
B. Cost of goods sold, balance sheet, income statement, and statement of cash flows.
C. Cost of goods sold, income statement, balance sheet, and statement of cash flows.
D. Income statement, balance sheet, statement of cash flows, and cost of goods sold.
A. $84,000
B. $136,800
C. $91,200
D. $228,000
281. Question ID: ICMA 10.P1.055 (Topic: Annual Profit Plan and Supporting Schedules)
Tidwell Corporation sells a single product for $20 per unit. All sales are on account, with 60%
collected in the month of sale and 40% collected in the following month. A partial schedule of cash
collections for January through March of the coming year reveals the following receipts for the
period.
Cash Receipts
January February March
December receivables $32,000
From January sales 54,000 $36,000
From February sales 66,000 $44,000
Other information includes the following:
A. 3,850 units.
282. Question ID: CMA 692 H2 (Topic: Annual Profit Plan and Supporting Schedules)
Pardise Company budgets on an annual basis for its fiscal year. The following beginning and ending
inventory levels (in units) are planned for the fiscal year of July 1 through June 30:
July 1 June 30
Raw material* 40,000 50,000
Work-in-process 10,000 20,000
Finished goods 80,000 50,000
*Two units of raw materials are needed to produce each unit of finished product.
If Pardise Company plans to sell 480,000 units during the fiscal year, the number of units it will have
to manufacture during the year is
A. 440,000 units.
B. 450,000 units.
C. 480,000 units.
D. 510,000 units.
283. Question ID: ICMA 10.P1.070 (Topic: Annual Profit Plan and Supporting Schedules)
Granite Company sells products exclusively on account and has experienced the following collection
pattern: 60% in the month of sale, 25% in the month after the sale, and 15% in the second month
after the sale. Uncollectible accounts are negligible. Customers who pay in the month of the sale are
given a 2% discount. If sales are $220,000 in January, $200,000 in February, $280,000 in March,
and $260,000 in April, Granite's accounts receivable balance on May 1 will be
A. $146,000.
B. $107,120.
C. $204,000.
D. $143,920.
284. Question ID: ICMA 10.P1.052 (Topic: Annual Profit Plan and Supporting Schedules)
Streeter Company produces microwave turntables. Sales for the next year are expected to be
65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter,
and 66,000 units in the fourth quarter. Streeter maintains a finished goods inventory at the end of
each quarter equal to one half of the units expected to be sold in the next quarter. However, due to a
work stoppage, the finished goods inventory at the end of the first quarter is 8,000 units less than it
should be. How many units should Streeter produce in the second quarter?
A. 80,000 units.
B. 78,000 units.
C. 75,000 units.
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Hock 2020 Part 1
Section B - Planning, Budgeting, and Forecasting.
Questions
D. 86,000 units.
285. Question ID: CMA 692 3.25 (Topic: Annual Profit Plan and Supporting Schedules)
Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in
sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of
the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Each
unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are
800,000 pounds of direct materials in inventory on June 30.
Berol Company's production requirement in units of finished product for the 3-month period ending
September 30 is
A. 630,500 units.
B. 638,000 units.
C. 712,025 units.
D. 665,720 units.
286. Question ID: CMA 691 3.15 (Topic: Annual Profit Plan and Supporting Schedules)
Which one of the following schedules would be the last item to be prepared in the normal budget
preparation process?
287. Question ID: CIA 594 III.68 (Topic: Annual Profit Plan and Supporting Schedules)
A company produces a product that requires 2 pounds of a raw material. The company forecasts
that there will be 6,000 pounds of raw material on hand at the end of June. At the end of any given
month the company wishes to have 30% of next month's raw material requirements on hand. The
company has budgeted production of the product for July, August, September, and October to be
10,000, 12,000, 13,000, and 11,000 units, respectively. As of June 1, the raw material sells for $1.00
per pound.
The cost of inventory is determined using the last-in-first-out (LIFO) method. If the price of raw
material increases 10% as of June 30, what will be the effect of this increase on the cost of
purchases from July to September?
A. $600 increase.
B. $3,230 increase.
C. $7,060 increase.
D. $60 increase.
288. Question ID: ICMA 10.P1.080 (Topic: Annual Profit Plan and Supporting Schedules)
Brooke Company's management team is preparing a cash budget for the coming quarter. The
following budgeted information is under review.
Cash $200,000
Accounts receivable 300,000
Accounts payable (inventory) 400,000
Given the above information, the projected ending cash balance for February will be
A. $120,000.
B. $712,500.
C. $500,000.
D. $232,500.
289. Question ID: CIA 1190 IV.17 (Topic: Annual Profit Plan and Supporting Schedules)
The master budget
Units at Units at
Part No.
April 1 April 30
C-14 12,000 10,000
A-9 21,000 9,000
B-6 32,000 10,000
D-28 14,000 6,000
Assume Superflite plans to manufacture 400,000 units in April. The total April budget for all
purchased components should be
A. $1,608,500.
B. $1,596,500.
C. $1,580,500.
D. $1,600,000.
Sales $855,000
Cost of goods sold 425,000
Rent and salary expenses 375,000
Historically, all of the sales are on account and are made evenly over the quarter. 5% of all sales are
determined to be uncollectible and written off. The balance of the receivables is collected in 50 days.
This sales and collection experience is expected to continue in the first quarter. The projected
balance sheet for the first day of the quarter includes the following account balances.
Cash $ 10,000
Accounts receivable (net) 450,000
Inventory 900,000
Accounts payable 800,000
How much cash can Tip-Top anticipate collecting in the first quarter (based on a 360-day year)?
A. $830,000.
B. $811,000.
C. $901,250.
D. $902,500
292. Question ID: CMA 1295 H4 (Topic: Annual Profit Plan and Supporting Schedules)
When preparing the series of annual operating budgets, management usually starts the process with
the
A. Balance sheet.
B. Capital budget.
C. Sales budget.
D. Cash budget.
Beginning Budgeted
Balances Amounts
Cash $ 50,000
Accounts receivable 180,000
Sales $800,000
Cash disbursements 780,000
Depreciation 25,000
Ending accounts receivable balance 210,000
What is the budgeted cash balance of the company at the end of the coming month?
A. $15,000
B. $40,000
C. $45,000
D. $70,000
294. Question ID: ICMA 10.P1.056 (Topic: Annual Profit Plan and Supporting Schedules)
Stevens Company manufactures electronic components used in automobile manufacturing. Each
component uses two raw materials, Geo and Clio. Standard usage of the two materials required to
produce one finished electronic component, as well as the current inventory, are shown below.
A. $1,172,000.
B. $1,028,000.
C. $1,200,000.
D. $1,032,000.
296. Question ID: ICMA 19.P1.029 (Topic: Top-Level Planning and Analysis)
Calculate the pro forma after-tax profit for next year based on the data below.
A. $15,000.
B. $18,200.
C. $16,100.
D. $15,575.
297. Question ID: HOCK CMA.P1A5.06 (Topic: Top-Level Planning and Analysis)
Pro forma financial statements are used within a company for various purposes. They are not used
for
A. comparison with actual results for performance reporting in order to determine employee
bonuses.
B. "what if" analysis, to forecast the effect of a proposed change.
C. determining whether the company will be in compliance with required covenants on its long-term
debt.
D. determining the company's future needs for external financing.
A. accounts payable.
B. notes payable.
C. accrued salaries and wages.
D. retained earnings.
299. Question ID: HOCK CMA.P1A5.07 (Topic: Top-Level Planning and Analysis)
Which of the following events will cause a company's requirements for external financing to
increase?
A. II and V.
B. II, IV and V.
C. I, II, and V.
D. III and IV.
300. Question ID: HOCK CMA.P1A5.03 (Topic: Top-Level Planning and Analysis)
A company's need for external financing depends on several factors. A factor that does not affect
the company's need for external financing is
BALANCE SHEET
Assets Liabilities
Cash $ 9,700 Accounts payable $ 3,000
Accounts receivable 15,300 Notes payable 10,000
Inventory 18,500 Accrued liabilities 6,000
Total current assets $ 43,500 Total current liabilities $ 19,000
INCOME STATEMENT
Net sales $100,000
Cost of goods sold 66,200
Gross profit $ 33,800
A. $5,175
B. $2,462
C. $455
D. $1,448
302. Question ID: CIA 595 IV.52 (Topic: Top-Level Planning and Analysis)
A company had $500,000 of sales for the year just ended and is projecting sales of $600,000 for the
coming year. For every $1 increase in sales, 38 cents of additional financing is required for the
purchase of additional assets. The projected profit margin is 20%, and 60% of profits will be retained
for reinvestment in the company. The amount of additional external financing needed by the
company in the coming year is:
A. $0.
B. $120,000.
C. $38,000.
D. $72,000.
BALANCE SHEET
Assets Liabilities
Cash $ 9,700 Accounts payable $ 3,000
Accounts receivable 15,300 Notes payable 10,000
Inventory 18,500 Accrued liabilities 6,000
Total current assets $ 43,500 Total current liabilities $ 19,000
INCOME STATEMENT
Net sales $100,000
Cost of goods sold 66,200
Gross profit $33,800
A. 17.6%
B. 67.8%
C. 27.4%
D. 15%
304. Question ID: HOCK CMA.P1A5.11 (Topic: Top-Level Planning and Analysis)
The management of the Grow 'n' Glow Manufacturing Company expects a 10% increase in sales for
the coming year and has prepared the following pro forma balance sheet and income statement (000
omitted) for the coming year:
BALANCE SHEET
Assets Liabilities
Cash $ 10,670 Accounts payable $ 3,300
Accounts receivable 16,830 Notes payable 10,000
Inventory 20,350 Accrued liabilities 6,600
Total current assets $ 47,850 Total current liabilities $ 19,900
A. The company would have $1,207 additional funds available to use to either pay down its loans or
invest instead of needing to borrow.
B. The company would have $2,145 additional funds available to use to either pay down its loans or
invest instead of needing to borrow.
C. The company would need to borrow only $643 instead of $938.
D. The company would need to borrow only $295 instead of $938.
A. decrease, because more inventory will be sold and the decrease in inventory will generate
additional cash.
B. decrease, because the higher sales will lead to higher profits, and the added profits will provide
more cash.
C. increase, because of its need for additional investment in working capital and fixed assets to
support the increased sales.
D. increase, because in order to increase sales, the firm must decrease its prices, which will lead to
decreased profits and decreased cash.
306. Question ID: HOCK CMA.P1A5.13 (Topic: Top-Level Planning and Analysis)
Below are a year-end actual balance sheet for Year 1 and pro forma balance sheet and income
statement for Year 2 for the Grow 'n' Glow Manufacturing Company (000 omitted).
Held-to-maturity
$ 45,600 Held-to-maturity securities $ 45,600
securities
Net fixed assets 32,200 Net fixed assets 35,000
Total long-term assets $ 77,800 Total long-term assets $ 80,600
Liabilities Liabilities
Accounts payable $ 3,000 Accounts payable $ 3,300
Notes payable (incl. addtl.
Notes payable 10,000 13,738
fds. needed)
Equity Equity
Common stock $ 10,000 Common stock $ 10,000
Additional paid-in capital 30,000 Additional paid-in capital 30,000
Retained earnings 26,700 Retained earnings 29,212
Total equity $ 66,700 Total equity $ 69,212
Total liabilities & equity $121,300 Total liabilities & equity $128,450
INCOME STATEMENT YR
2-PRO FORMA
Net sales $110,000
COGS (incl. $3,200 depr.) 72,820
Gross profit $ 37,180
A. $7,345
B. $6,000
C. $6,395
D. $2,800
307. Question ID: HOCK CMA.P1A5.12 (Topic: Top-Level Planning and Analysis)
Below are a year-end actual balance sheet for Year 1 and pro forma balance sheet and income
statement for Year 2 for the Grow 'n' Glow Manufacturing Company (000 omitted).
Held-to-maturity
$ 45,600 Held-to-maturity securities $ 45,600
securities
Net fixed assets 32,200 Net fixed assets 35,000
Total long-term assets $ 77,800 Total long-term assets $ 80,600
Liabilities Liabilities
Accounts payable $ 3,000 Accounts payable $ 3,300
Notes payable (incl. addtl.
Notes payable 10,000 13,738
fds. needed)
Equity Equity
Common stock $ 10,000 Common stock $ 10,000
Additional paid-in capital 30,000 Additional paid-in capital 30,000
Retained earnings 26,700 Retained earnings 29,212
Total equity $ 66,700 Total equity $ 69,212
Total liabilities & equity $121,300 Total liabilities & equity $128,450
INCOME STATEMENT YR
2-PRO FORMA
Net sales $110,000
COGS (incl. $3,200 depr.) 72,820
Gross profit $ 37,180
A. $5,591
B. $4.641
C. $4,771
D. $6,541
308. Question ID: HOCK CMA.P1A5.02 (Topic: Top-Level Planning and Analysis)
A firm's capital intensity ratio is
309. Question ID: HOCK CMA.P1A5.14 (Topic: Top-Level Planning and Analysis)
Below are a year-end actual balance sheet for Year 1 and pro forma balance sheet and income
statement for Year 2 for the Grow 'n' Glow Manufacturing Company (000 omitted).
Held-to-maturity
$ 45,600 Held-to-maturity securities $ 45,600
securities
Net fixed assets 32,200 Net fixed assets 35,000
Total long-term assets $ 77,800 Total long-term assets $ 80,600
Liabilities Liabilities
Accounts payable $ 3,000 Accounts payable $ 3,300
Notes payable (incl. addtl.
Notes payable 10,000 13,738
fds. needed)
Accrued liabilities 6,000 Accrued liabilities 6,600
Total current liabilities $ 19,000 Total current liabilities $ 23,638
Equity Equity
Common stock $ 10,000 Common stock $ 10,000
Additional paid-in capital 30,000 Additional paid-in capital 30,000
Retained earnings 26,700 Retained earnings 29,212
Total equity $ 66,700 Total equity $ 69,212
Total liabilities & equity $121,300 Total liabilities & equity $128,450
INCOME STATEMENT YR
2-PRO FORMA
Net sales $110,000
COGS (incl. $3,200 depr.) 72,820
Gross profit $ 37,180
A. $1,328
B. $2,724
C. $(1,014)
D. $(2,410)