Extra Questions Special Order & Budget

11) Budgeted performance goals generally provide a better basis for

evaluating actual performance than past performance.
Answer: TRUE

Which of the following budgets identifies the overall goals and objectives of
an organization?
A) sales budget
B) master budget
C) strategic plan
D) financial planning model
Answer: C
5) Important factors used to forecast sales for a company include all of the
following items EXCEPT ________.
A) changes in firm's prices
B) general economic conditions
C) changes in product mix
D) design of production equipment
Answer: D
9) Which of the following statements about long-range plans is FALSE?
A) Long-range plans provide forecasted financial statements for five to ten
year periods.
B) Long-range plans guide day-to-day operations.
C) Companies coordinate long-range plans with capital budgets.
D) A decision made during long-range planning is the acquisition of a plant
building.
Answer: B
12) A sales budget is a prediction of sales under a given set of conditions.
Answer: FALSE
5) What type of information is used in making nonroutine decisions, such as
the decision to replace a traditional assembly line with fully automated
robots?
A) scorekeeping information
B) attention directing information
C) problem solving information
D) auditing information
Answer: C
13) A company is unsure whether it is more cost efficient to make or buy a
component used in a manufactured product that is mass produced. What type
of information is needed to make this decision?
A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing
Answer: C
6) Missouri Company has a current production capacity level of 200,000 units
per month. At this level of production, variable costs are $0.60 per unit and
fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. Gates
Company has contacted Missouri Company about purchasing 20,000 units at
$1.00 each. Current sales would not be affected by the special order and no
additional fixed costs would be incurred on the special order. If the order is
accepted, what is Missouri Company's change in profits?
A) $8,000 increase
B) $8,000 decrease
C) $10,000 increase
D) $10,000 decrease
Answer: A
12) Arkansas Company has no beginning and ending inventories, and has
obtained the following data for its only product:

Selling price per unit $65

Direct materials used $150,000
Direct labor $225,000
Variable factory overhead $140,000
Variable selling and administrative expenses $60,000
Fixed factory overhead $370,000
Fixed selling and administrative expenses $30,000

Units produced and sold 20,000

Assume there is excess capacity. There is a special order outstanding for 1,000
units at $40.00 per unit. If Arkansas Company accepts the special order, net
income would ________.
A) increase by $40,000
B) increase by $11,250
C) decrease by $28,750
D) decrease by $10,000
Answer: B