Chapter 8: Budgeting for Planning and Control
158. Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $0.11 per machine hour
Machining $25,000 + $0.50 per machine hour
Setups $50 per batch
Purchasing $200 + $45 per purchase order
Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$11,500
Machining
28,300
Setups
550
Purchasing
1,000
What is the budgeted cost per decal? (Round to three decimal places.)
a. $0.468
b. $0.478
c. $0.486
d. $0.487
159. Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $0.11 per machine hour
Machining $25,000 + $0.50 per machine hour
Setups $50 per batch
Purchasing $200 + $45 per purchase order
Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$11,500
Machining
28,300
Setups
550
Purchasing
1,000
Chapter 8: Budgeting for Planning and Control
What is the budget variance for setups in an activity-based performance report?
a. $50 F
b. $50 U
c. $800 U
d. none of these
160. Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $0.11 per machine hour
Machining $25,000 + $0.50 per machine hour
Setups $50 per batch
Purchasing $200 + $45 per purchase order
Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$11,500
Machining
28,300
Setups
550
Purchasing
1,000
What is the budget variance for maintenance in an activity-based performance report?
a. $50 F
b. $50 U
c. $550 U
d. $550 F
Chapter 8: Budgeting for Planning and Control
161. Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $0.11 per machine hour
Machining $25,000 + $0.50 per machine hour
Setups $50 per batch
Purchasing $200 + $45 per purchase order
Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$11,500
Machining
28,300
Setups
550
Purchasing
1,000
What is the budget variance for machining in an activity-based performance report?
a. $50 F
b. $50 U
c. $800 U
d. $800 F
162. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the budgeted maintenance cost if there was production of 50,000 reflectors that will require 8,000 machine
hours, 25 batches, and 15,000 purchase orders?
a. $15,000
b. $32,000
c. $47,000
d. $79,000
Chapter 8: Budgeting for Planning and Control
163. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the budgeted inspection cost if there was production of 50,000 reflectors that will require 8,000 machine
hours, 25 batches, and 15,000 purchase orders?
a. $18,750
b. $60,000
c. $66,000
d. $78,750
164. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the budgeted setup costs if there was production of 50,000 reflectors that will require 8,000 machine hours,
25 batches, and 15,000 purchase orders?
a. $1,000
b. $25,000
c. $8,000,000
d. $15,000,000
Chapter 8: Budgeting for Planning and Control
165. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the budgeted purchasing cost if there was production of 50,000 reflectors that will require 8,000 machine
hours, 25 batches, and 15,000 purchase orders?
a. $150,000
b. $200,000
c. $100,000
d. none of these
166. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the machining cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches,
and 15,000 purchase orders?
a. $47,000
b. $43,000
c. $38,410,000
d. none of these
Chapter 8: Budgeting for Planning and Control
167. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the total cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and
15,000 purchase orders?
a. $393,750
b. $933,410
c. $3,937,500
d. $38,410,000
168. Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers
have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the budget for maintenance if 20,000 reflectors were made that required 3,500 machine hours, 12 batches,
and 5,000 purchase orders?
a. $3,500
b. $15,000
c. $29,000
d. $14,000
Chapter 8: Budgeting for Planning and Control
169. Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $2 per machine hour
Machining $55,000 + $3 per machine hour
Inspection $70,000 + $500 per batch
Setups $2,000 per batch
Purchasing $80,000 + $150 per purchase order
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$20,000
Machining
73,000
Inspection
73,000
Setups
18,000
Purchasing
82,000
What is the budget variance for maintenance in an activity-based performance report?
a. $1,000 U
b. $3,000 U
c. $3,000 F
d. none of these
170. Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $2 per machine hour
Machining $55,000 + $3 per machine hour
Inspection $70,000 + $500 per batch
Setups $2,000 per batch
Purchasing $80,000 + $150 per purchase order
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$20,000
Machining
73,000
Inspection
73,000
Setups
18,000
Purchasing
82,000
Chapter 8: Budgeting for Planning and Control
What is the budget variance for machining in an activity-based performance report?
a. $1,000 U
b. $2,000 U
c. $3,000 U
d. none of these
171. Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $2 per machine hour
Machining $55,000 + $3 per machine hour
Inspection $70,000 + $500 per batch
Setups $2,000 per batch
Purchasing $80,000 + $150 per purchase order
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$20,000
Machining
73,000
Inspection
73,000
Setups
18,000
Purchasing
82,000
What is the budget variance for inspection in an activity-based performance report?
a. $1,000 F
b. $2,000 F
c. $3,000 F
d. none of these
Chapter 8: Budgeting for Planning and Control
172. Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $2 per machine hour
Machining $55,000 + $3 per machine hour
Inspection $70,000 + $500 per batch
Setups $2,000 per batch
Purchasing $80,000 + $150 per purchase order
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$20,000
Machining
73,000
Inspection
73,000
Setups
18,000
Purchasing
82,000
What is the budget variance for setups in an activity-based performance report?
a. $1,000 F
b. $2,000 F
c. $3,000 F
d. none of these
173. Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $2 per machine hour
Machining $55,000 + $3 per machine hour
Inspection $70,000 + $500 per batch
Setups $2,000 per batch
Purchasing $80,000 + $150 per purchase order
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$20,000
Machining
73,000
Inspection
73,000
Setups
18,000
Purchasing
82,000
Chapter 8: Budgeting for Planning and Control
What is the budget variance for purchasing in an activity-based performance report?
a. $1,000 U
b. $2,000 U
c. $3,000 U
d. none of these
174. Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have
been developed:
Activity Cost Formula
Maintenance $11,000 + $2 per machine hour
Machining $55,000 + $3 per machine hour
Inspection $70,000 + $500 per batch
Setups $2,000 per batch
Purchasing $80,000 + $150 per purchase order
Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders
Maintenance
$20,000
Machining
73,000
Inspection
73,000
Setups
18,000
Purchasing
82,000
What is the budget variance for total costs in an activity-based performance report?
a. $1,000 F
b. $2,000 F
c. $3,000 F
d. none of these
Chapter 8: Budgeting for Planning and Control
175. Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost
drivers have been developed:
Activity Cost Formula
Design $5,000 + $0.05 per machine hour
Machining $25,000 + $0.01 per machine hour
Setups $35 per batch
Purchasing $50 + $15 per purchase order
Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase
orders
Design $5,080
Machining ?
Setups ?
Purchasing $600
The following variances were given in the activity performance report:
Design ?
Machining $40 F
Setups 15 F
Purchasing ?
What is the actual cost of machining?
a. $24,970
b. $25,010
c. $25,050
d. none of these
Chapter 8: Budgeting for Planning and Control
176. Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost
drivers have been developed:
Activity Cost Formula
Design $5,000 + $0.05 per machine hour
Machining $25,000 + $0.01 per machine hour
Setups $35 per batch
Purchasing $50 + $15 per purchase order
Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase
orders
Design $5,080
Machining ?
Setups ?
Purchasing $600
The following variances were given in the activity performance report:
Design ?
Machining $40 F
Setups $15 F
Purchasing ?
What is the actual cost of setups?
a. $160
b. $190
c. $300
d. none of these
Chapter 8: Budgeting for Planning and Control
177. Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost
drivers have been developed:
Activity Cost Formula
Design $5,000 + $0.05 per machine hour
Machining $25,000 + $0.01 per machine hour
Setups $35 per batch
Purchasing $50 + $15 per purchase order
Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase
orders
Design $5,080
Machining ?
Setups ?
Purchasing $600
The following variances were given in the activity performance report:
Design ?
Machining $40 F
Setups $15 F
Purchasing ?
What is the activity variance for design?
a. $40 F
b. $30 U
c. $15 F
d. d. $100 U
Chapter 8: Budgeting for Planning and Control
178. Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost
drivers have been developed:
Activity Cost Formula
Design $5,000 + $0.05 per machine hour
Machining $25,000 + $0.01 per machine hour
Setups $35 per batch
Purchasing $50 + $15 per purchase order
Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase
orders
Design $5,080
Machining ?
Setups ?
Purchasing $600
The following variances were given in the activity performance report:
Design ?
Machining $40 F
Setups $15 F
Purchasing ?
What is the activity variance for purchasing?
a. $500 U
b. $100 U
c. $50 U
d. none of these
179. Goal congruence means
a. there is alignment of organizational and managerial goals.
b. the organization is aligned to the needs of the environment.
c. the organization is aligned to shareholder goals.
d. there is no divergence between organization and stockholder goals.
Chapter 8: Budgeting for Planning and Control
180. The ideal budget system creates
a. extreme caution in managers.
b. drive and risk avoidance in managers.
c. drive and goal congruence in managers.
d. none of these.
181. When budgets are used to evaluate performance, which factor might NOT have a significant behavioral effect?
a. concern for status
b. concern for financial matters
c. concern for career
d. concern for company profit
182. Analysis that fosters management by exception is
a. value analysis.
b. process analysis.
c. sensitivity analysis.
d. variance analysis.
183. When the reaction to a budget is negative, resulting in managerial behavior that is negative for the organization, the
resulting behavior is known as
a. dysfunctional behavior.
b. psychopathic behavior.
c. congruent behavior.
d. sociopathic behavior.
184. Which of the following is NOT a key feature of an ideal budgetary system?
a. participation
b. incentives
c. accountability for noncontrollable costs
d. feedback on performance
185. Which of the following is NOT a key feature of an ideal budgetary system?
a. controllable costs
b. single measure for performance
c. incentives
d. frequent feedback
Chapter 8: Budgeting for Planning and Control
186. Which of the following is NOT an advantage of participative budgeting?
a. encourages incrementalism
b. encourages communication
c. encourages responsibility
d. encourages creativity
187. Myopic behavior occurs when
a. actions improve budgetary performance in the short-run but are harmful in the long run.
b. there is uncertainty.
c. there is focus on immediate costs.
d. actions improve budgetary performance in the distant time horizon.
188. An example of a negative incentive is
a. promotion.
b. nonfinancial incentive.
c. feedback reports.
d. termination of employment.
189. Which of the following is NOT a potential disadvantage of participative budgeting?
a. pseudoparticipation
b. performance feedback
c. unrealistic standards
d. budgetary slack
190. Participative budgeting has which of the following potential problems?
a. building slack into a budget
b. encourages individual behavior that is in basic conflict with the goals of the organization
c. using budgets as a part of performance evaluations could lead to unethical behavior
d. managers take action that will improve performance in the short run but has long-term consequences
191. The condition that exists when managers deliberately underestimate revenues or overestimate costs to provide
flexibility is called:
a. Realistic standards
b. Monetary incentives
c. Budgetary slack
d. Management by exception