CMA Test 3

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Question 1 of 10

1. Question

The primary purpose of the Cash Budget is to:

Determine the net income for the period.
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Anticipate periods of cash surpluses or shortages to plan for financing or investment.
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Calculate the depreciation of fixed assets.
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Allocate overhead to production departments.
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Question 2 of 10

2. Question

A manufacturing company prepared a master budget based on production of 15,000 units. The standard variable manufacturing cost is $42 per unit and budgeted fixed manufacturing overhead is $180,000. Actual results for the period were as follows:

Actual units produced: 13,500

Actual variable manufacturing costs: $580,500

Actual fixed manufacturing overhead: $185,000

Using flexible budget analysis, what is the total manufacturing cost variance, and what does it indicate?

$18,500 unfavorable — actual costs exceeded the flexible budget at actual volume.
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$18,500 favorable — the company spent less than the static master budget.
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$44,500 favorable — lower production volume reduced total costs below the master budget.
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$44,500 unfavorable — actual costs exceeded the master budget for all cost components.
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Question 3 of 10

3. Question

A company uses a static budget based on 50,000 units. If the company actually produces 60,000 units, which of the following is the most appropriate way to evaluate its cost control performance?

Compare actual costs to the static budget.
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Compare actual costs to a flexible budget based on 60,000 units.
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Compare actual costs to the previous year's actual costs.
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No comparison is possible due to the volume change.
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Question 4 of 10

4. Question

A favorable Direct Materials Price Variance combined with an unfavorable Direct Materials Quantity Variance would most likely be caused by:

The purchase of higher-quality materials than standard.
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The purchase of lower-quality materials at a discount.
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A sudden increase in the market price of materials.
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More efficient use of materials by production workers.
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Question 5 of 10

5. Question

An unfavorable Direct Labor Rate Variance would most likely be caused by:

Using highly skilled workers to perform low-skill tasks.
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Poorly maintained machinery causing production delays.
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A decrease in the minimum wage.
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Lower-than-expected production volume.
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Question 6 of 10

6. Question

A company’s standard for direct materials is 3 pounds per unit at $4.00 per pound. During the month, 15,000 units were produced. The company purchased 50,000 pounds of material at $3.80 per pound and used 48,500 pounds in production.

What are the direct materials price variance and quantity variance?

Price variance: $10,000 favorable; Quantity variance: $14,000 unfavorable.
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Price variance: $10,000 unfavorable; Quantity variance: $14,000 favorable.
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Price variance: $9,700 favorable; Quantity variance: $14,000 unfavorable.
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Price variance: $10,000 favorable; Quantity variance: $6,000 unfavorable.
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Question 7 of 10

7. Question

Variable overhead efficiency variance is calculated as:

Actual Hours x (Actual Rate – Standard Rate).
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Standard Rate x (Actual Hours – Standard Hours Allowed).
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Actual Rate x (Actual Hours – Standard Hours Allowed).
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Budgeted Fixed OH – Actual Fixed OH.
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Question 8 of 10

8. Question

A company budgeted $360,000 of fixed manufacturing overhead for the quarter based on a denominator activity level of 18,000 machine hours. The standard production time is 0.6 machine hours per unit. During the quarter, 34,000 units were produced and actual fixed manufacturing overhead incurred was $374,400.

What are the fixed overhead spending variance and the production volume variance?

Spending variance: $14,400 unfavorable; Volume variance: $48,000 favorable.
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Spending variance: $14,400 favorable; Volume variance: $48,000 unfavorable.
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Spending variance: $14,400 unfavorable; Volume variance: $48,000 unfavorable.
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Spending variance: $48,000 favorable; Volume variance: $14,400 unfavorable.
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Question 9 of 10

9. Question

A division of a company has high revenue and low costs but requires a massive investment in specialized equipment. Which performance measure would be most appropriate for this division?

Gross Profit.
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Contribution Margin.
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Return on Investment (ROI).
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Cost Variance.
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Question 10 of 10

10. Question

Which of the following transfer pricing methods is generally considered best when an active outside market exists for the intermediate product?

Cost-plus pricing.
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Variable cost pricing.
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Market-based pricing.
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Negotiated pricing.
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1. Question

The primary purpose of the Cash Budget is to:

2. Question

A manufacturing company prepared a master budget based on production of 15,000 units. The standard variable manufacturing cost is $42 per unit and budgeted fixed manufacturing overhead is $180,000. Actual results for the period were as follows:

Actual units produced: 13,500

Actual variable manufacturing costs: $580,500

Actual fixed manufacturing overhead: $185,000

Using flexible budget analysis, what is the total manufacturing cost variance, and what does it indicate?

3. Question

A company uses a static budget based on 50,000 units. If the company actually produces 60,000 units, which of the following is the most appropriate way to evaluate its cost control performance?

4. Question

A favorable Direct Materials Price Variance combined with an unfavorable Direct Materials Quantity Variance would most likely be caused by:

5. Question

An unfavorable Direct Labor Rate Variance would most likely be caused by:

6. Question

A company’s standard for direct materials is 3 pounds per unit at $4.00 per pound. During the month, 15,000 units were produced. The company purchased 50,000 pounds of material at $3.80 per pound and used 48,500 pounds in production.

What are the direct materials price variance and quantity variance?

7. Question

Variable overhead efficiency variance is calculated as:

8. Question

What are the fixed overhead spending variance and the production volume variance?

9. Question

A division of a company has high revenue and low costs but requires a massive investment in specialized equipment. Which performance measure would be most appropriate for this division?

10. Question

Which of the following transfer pricing methods is generally considered best when an active outside market exists for the intermediate product?