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1. Your company has the following information:

	Activity 1	Activity 2	Activity 3
Budgeted Overhead Cost	$ A	$ B	$ C
Cost Driver	Number of setups	Number of inspections	Number of pounds
Predicted Level of Cost Driver	D	E	F
Actual Level of Cost Driver	G	H	I

If your company uses activity-based costing, then how would you compute the applied overhead?

($ A / D) + ($ B / E) + ($ C / F)

($ A / D x G) + ($ B / E x H) + ($ C / F x I)

($ A / G x D) + ($ B / H x E) + ($ C / I x F)

($ A + $ B + $ C) / (D + E + F) x (G + H + I)

2. Your company has $100,000 in budgeted overhead costs, 500 budgeted machine hours, and 450 actual machine hours. If your company uses traditional costing to allocate overhead based on machine hours, then what is the applied overhead?

$100,000

$100,000 / 450 x 500

$100,000 / 500 x 450

$100,000 x 450

3. How do you compute the cost of a manufactured product?

Direct material + Direct labor

Direct labor + Applied manufacturing overhead

Direct material + Direct labor + Applied manufacturing overhead

Direct material + Direct labor + Applied manufacturing overhead + Shipping Expense

4. How would you prepare a contribution margin income statement?

Sales Variable Cost Fixed Cost = Net Income

Sales Cost of Goods Sold Selling, General, & Administrative Expenses = Net Income

Sales Variable Cost Selling, General, & Administrative Expenses = Net Income

Sales Cost of Goods Sold Fixed Cost = Net Income

5. Imagine you had a contribution margin income statement, and you wanted to convert it into a traditional income statement. Which of the following statements best describes what you would have to do?

I. Remove the Contribution Margin and replace it with the Gross Margin.

II. Remove the Gross Margin and replace it with the Contribution Margin.

III. Remove the Fixed Costs and replace them with Selling, General, & Administrative Expenses.

IV. Remove the Selling, General, & Administrative Expenses and replace them with Fixed Costs.

I and III

I and IV

II and III

II and IV

6. The number of units you need to sell to break even would increase if your

fixed cost decreased.

variable cost per unit decreased.

selling price per unit decreased.

None of the above

7. The amount of sales revenue you need to generate to achieve your target profit would decrease if your

fixed cost decreased.

variable cost per unit increased.

selling price per unit decreased.

None of the above

8. Which of the following formulas would you use to prepare the Production Budget?

Budgeted Unit Sales x Budgeted Sales Price

Budgeted Unit Sales + Budgeted Units in Ending Finished Goods Inventory Budgeted Units in Beginning Finished Goods Inventory

(Budgeted Production Units x Per Unit Materials Requirements + Budgeted Ending Raw Materials Inventory Budgeted Beginning Raw Materials Inventory) x Unit Cost of Raw Materials

Budgeted Production Units x Per Unit Direct Labor Requirements x Direct Labor Cost per Hour

9. Which of the following formulas would you use to prepare the Raw Materials Purchases Budget?

Budgeted Unit Sales x Budgeted Sales Price

Budgeted Unit Sales + Budgeted Units in Ending Finished Goods Inventory Budgeted Units in Beginning Finished Goods Inventory

(Budgeted Production Units x Per Unit Materials Requirements + Budgeted Ending Raw Materials Inventory Budgeted Beginning Raw Materials Inventory) x Unit Cost of Raw Materials

Budgeted Production Units x Per Unit Direct Labor Requirements x Direct Labor Cost per Hour

10. Unlike the Flexible Budget, the Static Budget

is prepared at a single level of activity.

is prepared at multiple levels of activity.

is created by starting with last years budget and making adjustments as needed.

is created from scratch by questioning every single assumption.

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