D Budgeting

What is the principal budget factor?

• 1 The factor that managers like best
• 2 The largest cost item in the budget
• 3 The factor that limits the organisation's activity
• 4 The final stage in preparing a budget

Sales are 8,000 units, opening inventory is 500 units and closing inventory is 700 units. What is the production budget?

• 1 8,200 units
• 2 7,800 units
• 3 9,200 units
• 4 8,000 units

Each unit needs 3 kg of material. Production is 8,200 units. Opening materials inventory is 1,000 kg and closing is 1,500 kg. What is the purchases budget in kg?

• 1 24,100 kg
• 2 25,100 kg
• 3 24,600 kg
• 4 26,100 kg

Which item would NOT appear in a cash budget?

• 1 Wages paid
• 2 Receipts from customers
• 3 Depreciation
• 4 Payment to suppliers

A budget has variable costs of $96,000 at 10,000 units and fixed costs of $40,000. What are the total costs flexed to 12,000 units?

• 1 $136,000
• 2 $155,200
• 3 $115,200
• 4 $160,000

Why is a flexible budget better for control than a fixed budget when activity differs from plan?

• 1 It removes the need for variances
• 2 It gives a lower cost target
• 3 It ignores fixed costs
• 4 It compares actual results with a budget for the same level of activity

An investment of $100,000 returns $40,000 a year for 3 years. The cost of capital is 10 percent. What is the NPV to the nearest dollar?

• 1 -$20,000
• 2 $20,000
• 3 $526
• 4 -$526

An investment of $100,000 returns $40,000 a year. What is the payback period?

• 1 2 years
• 2 0.4 years
• 3 2.5 years
• 4 3 years

A perpetuity of $5,000 a year is discounted at 8 percent. What is its present value?

• 1 $40,000
• 2 $400,000
• 3 $5,400
• 4 $62,500

$10,000 is invested for 3 years at 6 percent compound interest. What is the value at the end?

• 1 $10,600
• 2 $11,000
• 3 $11,910
• 4 $11,800

Which is an advantage of participative budgeting?

• 1 Managers are more committed to achieving the budget
• 2 It needs less management time
• 3 It is faster than a top-down approach
• 4 It removes the risk of budget slack

Under responsibility accounting, a manager is held accountable for:

• 1 The costs and revenues the manager can control
• 2 All of the costs of the organisation
• 3 Costs that can only be influenced by others
• 4 Only the company's profit