Which of the following equations can be used to compute the total materials variance?   (A=Actual; S=Standard; Q=Quantity; P=Price)

Select the correct statement concerning the human factor of performance evaluation. 

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Which of the following budgets needs to be prepared before preparing a purchases budget?

Which of the following is not considered a pro forma financial statement? 

This question is worth a total of 12 points.                     The Wente Company, estimating its sales to be 15,000 units for the upcoming period, prepared the following static budget:                    Units:                                                     15,000             Sales                                                   $180,000             Less variable costs:                Manufacturing costs                           90,000                Selling and administrative costs         30,000             Contribution Margin                           $  60,000             Less fixed costs:                Manufacturing costs                            14,000                Selling and administrative costs          12,000             Net income                                         $  34,000  The owner of the business is not so sure about the 15,000 unit sales volume and has requested additional budgets.   Required: Below prepare two additional flexible budgets, one at 90% of the static budget volume level and one at 110% of the static budget volume level.                       Units: 13,500 units 15,000 units 16,500 units Sales $180,000 Less Variable costs:      Manufacturing cost: 90,000      Selling and administration costs 30,000 Contribution margin $60,000 Less fixed costs:      Manufacturing costs 14,000      Selling and administrative costs 12,000 Net Income $34,000

Which capital budgeting technique defines returns in terms of income instead of cash flows? 

EXTRA CREDIT  – possible 3 points – Can be answered only if all of your regular test questions are completed! What are the three (3) C’s to budgeting?

When are variances labeled as unfavorable? 

This question is worth a total of 20 points.    SHOW ALL COMPUTATIONS! Donovan Company’s balance sheet as of December 31, Year 1 is provided below:                                      Donovan Company                                  Balance Sheet                              December 31, Year 1             Assets             Cash                                                                $   17,500             Accounts receivable                                            20,000             Inventory                                                             12,500             Plant and equipment, net of depreciation      150,000             Total assets                                                      $ 200,000             Liabilities and Stockholders’ Equity             Accounts payable                                           $   15,000             Notes payable                                                      25,000             Capital stock                                                      100,000             Retained earnings                                                60,000             Total liabilities and stockholders’ equity       $ 200,000 In anticipation of preparing the company’s operating budget for the upcoming period, the company’s accountant has gathered the following information:        a) December Year 1 sales were $110,000.  Sales are expected to grow at a rate of 8% per month.  Half of all sales are for cash and half are on account. b.)  Inventory purchases are expected to total $50,000 during January and the inventory account is expected to have a $14,000 balance at January 31, Year 2.  All inventory purchases are on account. c.)  Selling and administrative expenses for January, Year 2 are budgeted at $30,000 (exclusive of depreciation) plus 10% of sales.  S&A expenses are paid in cash.  Depreciation is budgeted at $1,500 for the month. d.)  The notes payable will be paid in January, Year 2.  The amount due will be $25,250.  The $250 represents January’s interest expense. e.)  The company expects to purchase a new machine during January, Year 2 at a cost of $5,000.          Required:  Prepare a budgeted income statement for the month of January Year 2.  Use the traditional income statement format and ignore income taxes.