CMA- GLEIM MCQ - Part 1 (2nd Batch)

[101] Gleim #: 1.3.101 -- Source: CMA 0408 1-147
Martin Fabricating uses a cumulative average-time learning curve model to monitor labor costs.
Data regarding two recently completed batches of a part that is used in tractor-trailer rigs is as
follows:
Batch Number Cumulative Average
Number of Units Hours Per Unit
1 50 20
2 50 16
If the same rate of learning continues for the next several batches produced, which of the
following best describes (1) the type (i.e., degree) of learning curve that the firm is
experiencing and (2) the average hours per unit for units included in the 201-400 range of units
produced (i.e., the last 200 units)?
Type (Degree) of Average Hours Per
Learning Curve Unit for Units 201-400
A. 20% 10.24
B. 80% 10.24
C. 80% 7.68
D. 20% 3.84

[102] Gleim #: 1.3.102 -- Source: CMA 0408 1-150
A manufacturing company required 800 direct labor hours to produce the first lot of four units
of a new motor. Management believes that a 90% learning curve will be experienced over four
lots of production. How many direct labor hours will be required to manufacture the next 12
units?

[103] Gleim #: 1.4.103 -- Source: CMA 1294 3-12
Which one of the following is a sales forecasting technique that can be utilized in preparing the
annual profit plan?

[104] Gleim #: 1.4.104 -- Source: CMA 1293 4-25
The four components of time series data are secular trend, cyclical variation, seasonality, and
random variation. The seasonality in the data can be removed by

105] Gleim #: 1.4.105 -- Source: CMA 0205
A forecasting technique that is a combination of the last forecast and the last observed value is
called

[106] Gleim #: 1.4.106 -- Source: CIA 594 II-38
As part of a risk analysis, an auditor wishes to forecast the percentage growth in next month’s
sales for a particular plant using the past 30 months’ sales results. Significant changes in the
organization affecting sales volumes were made within the last 9 months. The most effective
analysis technique to use would be

[107] Gleim #: 1.4.107 -- Source: CIA 1189 III-50
What are the four components of a time series?

[108] Gleim #: 1.4.108 -- Source: CIA 589 III-50
The moving-average method of forecasting

[109] Gleim #: 1.4.109 -- Source: Publisher
Violation of which assumption underlying regression analysis is prevalent in time series
analysis?

[110] Gleim #: 1.4.110 -- Source: CMA 0408 1-152
Sales of big-screen televisions have grown steadily during the past five years. A dealer
predicted that the demand for February would be 148 televisions. Actual demand in February
was 158 televisions. If the smoothing constant is α = 0.3, the demand forecast for March, using
the exponential smoothing model, will be

[111] Gleim #: 1.5.111 -- Source: CMA 697 4-22
Philip Enterprises, distributor of video discs, is developing its budgeted cost of goods sold for
next year. Philip has developed the following range of sales estimates and associated
probabilities for the year:
Sales Estimate Probability
$ 60,000 25%
85,000 40
100,000 35
Philip’s cost of goods sold averages 80% of sales. What is the expected value of Philip’s
budgeted cost of goods sold?

[112] Gleim #: 1.5.112 -- Source: CMA 1293 4-26
The expected value of perfect information is the

[Fact Pattern #9]
The probabilities shown in the table below represent the estimate of sales for a new product.
Sales (Units) Probability
0-200 15%
201-400 45%
401-600 25%
601-800 15%

[113] Gleim #: 1.5.113 -- Source: Publisher
(Refers to Fact Pattern #9)
What is the probability of selling between 201 and 600 units of the product?

[114] Gleim #: 1.5.114 -- Source: Publisher
(Refers to Fact Pattern #9)
What is the best estimate of the expected sales of the new product?

[115] Gleim #: 1.5.115 -- Source: CMA 690 5-25
In decision making under conditions of uncertainty, expected value refers to the

[Fact Pattern #10]
A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks
and the weather is hot, it will make $2,500; if the weather is cold, the profit will be $1,000. If the
stand sells coffee and the weather is hot, it will make $1,900; if the weather is cold, the profit will be
$2,000. The probability of cold weather on a given day at this time is 60%.
[116] Gleim #: 1.5.116 -- Source: CMA 1292 4-21
(Refers to Fact Pattern #10)
The expected payoff for selling coffee is

[117] Gleim #: 1.5.117 -- Source: CMA 1292 4-22
(Refers to Fact Pattern #10)
The expected payoff if the vendor has perfect information is

[118] Gleim #: 1.5.118 -- Source: CMA 1292 4-23
(Refers to Fact Pattern #10)
If the probability of hot weather, given a hot weather forecast, is 50%, how much would the
vendor be willing to pay for the forecast?

[Fact Pattern #11]
Butler and Burnside are projecting market conditions for the upcoming month. They have prepared
the following payoff table:
Demand in Units
0 2 4 6
Probability of Demand
Supply
in Units 0.1 0.3 0.4 0.2
0 $ 0 $ 0 $ 0 $ 0
2 (80) 40 40 40
4 (160) (40) 80 80
6 (240) (120) 0 120
[119] Gleim #: 1.5.119 -- Source: CMA 689 5-28
(Refers to Fact Pattern #11)
Butler and Burnside’s expected profit when supply equals 4 units is

[120] Gleim #: 1.5.120 -- Source: CMA 689 5-29
(Refers to Fact Pattern #11)
Butler and Burnside’s expected profit with perfect information is

[121] Gleim #: 1.5.121 -- Source: CMA 689 5-30
(Refers to Fact Pattern #11)
The price Butler and Burnside are willing to pay for perfect information is

[122] Gleim #: 1.5.122 -- Source: Publisher
Pongo Company’s managers are attempting to value a piece of land they own. One potential
occurrence is that the old road bordering the land gets paved. Another possibility is that the
road does not get paved. A third outcome is that the road might be destroyed and completely
replaced by a new road. Based on the following future states of nature, their probabilities, and
subsequent values of the land, what is the expected value of the land?
Future States of Nature (SN) Probability
SN 1: Current road gets paved .5
SN 2: Road does not get paved .4
SN 3: Current road destroyed and
replaced with new road .1
Estimates of land value under each possible future state of nature:
Value if SN 1: $200,000
Value if SN 2: $100,000
Value if SN 3: $550,000

[123] Gleim #: 1.5.123 -- Source: Publisher
Under favorable weather conditions, the management of Flesher Farms expects its raspberry
crop to have a $120,000 market value. An unprotected crop subject to frost has an expected
market value of $80,000. If Flesher protects the raspberries against frost, the market value of
the crop is still expected to be $120,000 under frost-free conditions and $180,000 if a frost
occurs. What must be the probability of a frost for Flesher to be indifferent to spending $20,000
for tents to provide frost protection?

[124] Gleim #: 1.5.124 -- Source: Publisher
During the past few years, Wilder Company has experienced the following average number of
power outages:
Number per Month Number of Months
0 3
1 2
2 4
3 3
12
Each power outage results in out-of-pocket costs of $800. For $1,000 per month, Wilder can
lease a generator to provide power during outages. If Wilder leases a generator in the coming
year, the estimated savings (or additional expense) for the year will be

[Fact Pattern #12]
The College Honor Society sells hot
pretzels at the home football games. The
pretzels are sold for $1.00 each, and the
cost per pretzel is $.30. Any unsold
pretzels are discarded because they will
be stale before the next home game.
The frequency distribution of the demand for
pretzels per game is presented as follows.
Unit Sales Volume Probability
2,000 pretzels .10
3,000 pretzels .15
4,000 pretzels .20
5,000 pretzels .35
6,000 pretzels .20
[125] Gleim #: 1.5.125 -- Source: CMA 1289 5-20
(Refers to Fact Pattern #12)
The estimated demand for pretzels at the next home football game using an expected value
approach is

[126] Gleim #: 1.5.126 -- Source: CMA 1289 5-21
(Refers to Fact Pattern #12)
The estimated demand for pretzels at the next home football game using a deterministic
approach based on the most likely outcome is

[127] Gleim #: 1.5.127 -- Source: CMA 1289 5-22
(Refers to Fact Pattern #12)
The conditional profit per game of having 4,000 pretzels available but only selling 3,000
pretzels is

[128] Gleim #: 1.5.128 -- Source: CMA 1289 5-23
(Refers to Fact Pattern #12)
The conditional profit per game of having 4,000 pretzels available and selling all 4,000 pretzels
is

[129] Gleim #: 1.5.129 -- Source: CMA 690 5-19
Alsen Company is in the process of preparing its budget. As part of the process, the company
has prepared sales estimates and estimated the probability associated with each sales estimate.
Which one of the following techniques should be used by Alsen to determine sales for
budgeting purposes?

[130] Gleim #: 1.5.130 -- Source: CMA 692 4-4
The expected monetary value of an event

[131] Gleim #: 1.5.131 -- Source: CMA 1286 5-3
Expected value in decision analysis is

[132] Gleim #: 1.5.132 -- Source: CMA 688 5-20
The following table contains the profit outcomes for each state of nature and decision
combination for a firm
States of Nature
S1 S2 S3
Decision 1 $ 24 $14 $ (6)
Decision 2 $ 20 $10 $ 5
Decision 3 $(20) $ 8 $15
Probabilities 0.10 0.50 0.40
The expected value of perfect information for this firm in this case is

[133] Gleim #: 1.5.133 -- Source: CMA 691 4-1
The expected monetary value of an act is the

[134] Gleim #: 1.5.134 -- Source: CMA 691 4-3
The expected value of perfect information is the

[135] Gleim #: 1.5.135 -- Source: CIA 1188 III-44
In decision theory, those uncontrollable future events that can affect the outcome of a decision
are

[Fact Pattern #13]
The Booster Club at Blair College sells hot dogs at home basketball games. The group has a
frequency distribution of the demand for hot dogs per game and plans to apply the expected value
decision rule to determine the number of hot dogs to stock.
[136] Gleim #: 1.5.136 -- Source: CMA 691 4-2
(Refers to Fact Pattern #13)
The Booster Club should select the demand level that

[Fact Pattern #14]
A company is considering three alternative machines to produce a new product. The cost structures
(unit variable costs plus avoidable fixed costs) for the three machines are shown as follows. The
selling price is unaffected by the machine used.
Single purpose machine $.60x + $20,000
Semiautomatic machine $.40x + $50,000
Automatic machine $.20x + $120,000
The demand for units of the new product is described by the following probability distribution.
Demand Probability
200,000 0.4
300,000 0.3
400,000 0.2
500,000 0.1

[137] Gleim #: 1.5.137 -- Source: CMA 689 5-26
(Refers to Fact Pattern #14)
Ignoring the time value of money, the expected cost of using the semiautomatic machine is

[138] Gleim #: 1.5.138 -- Source: CMA 689 5-27
(Refers to Fact Pattern #14)
Using the expected value criterion,

[Fact Pattern #15]
Stan Berry is considering selling peanuts at the Keefer High School football games. The peanuts
would cost $.50 per bag and could be sold for $1.50 per bag. No other costs would be incurred to sell
the peanuts. All unsold bags can be returned to the supplier for $.30 each. Berry estimated the
demand for peanuts at each football game and constructed the payoff table that follows.
Action (Bags to Stock)
Demand Probability
(Bags) of Demand 20 30 40 50
20 .2 $20 $18 $16 $14
30 .4 $20 $30 $28 $26
40 .3 $20 $30 $40 $38
50 .1 $20 $30 $40 $50
[139] Gleim #: 1.5.139 -- Source: CMA 690 5-17
(Refers to Fact Pattern #15)
The optimum number of bags of peanuts for Stan Berry to stock is

[140] Gleim #: 1.5.140 -- Source: CMA 690 5-18
(Refers to Fact Pattern #15)
The maximum that Stan Berry should pay for perfect information so that he could always stock
the correct number of bags of peanuts is

[141] Gleim #: 1.5.141 -- Source: CMA 0205
Carson Products sell sweatshirts and is preparing for a World Cup Soccer match. The cost per
sweatshirt varies with the quantity purchased as follows.
Quantity Unit cost
4,000 $14.00
5,000 13.50
6,000 13.00
7,000 12.50
Carson must purchase the sweatshirts one month before the game and has analyzed the market
and estimated sales levels as follows.
Unit sales 4,000 5,000 6,000 7,000
Probability 15% 20% 35% 30%
The estimated selling price is $25 for sales made before and during game day. Any sweatshirts
remaining after game day can be sold at wholesale to a local discount store for $10.
The expected profit if Carson purchased 6,000 shirts is

[Fact Pattern #16]
A computer store sells four computer models designated as P104, X104, A104, and S104. The store
manager has made random number assignments to represent customer choices based on past sales
data. The assignments are shown below.
Model Random Numbers
P104 0-1
X104 2-6
A104 7-8
S104 9
[142] Gleim #: 1.5.142 -- Source: CMA 688 5-25
(Refers to Fact Pattern #16)
The probability that a customer will select model P104 is

[143] Gleim #: 1.5.143 -- Source: CMA 688 5-26
(Refers to Fact Pattern #16)
In running a simulation of the computer demand, the following numbers are drawn in
sequence: 2, 8, and 6. The simulation indicates that the third customer will purchase.

[144] Gleim #: 1.5.144 -- Source: CMA 683 5-8
A company is simulating the actions of a government agency in which 50% of the time a recall
of a product is required, 40% of the time only notification of the buyer about a potential defect
is required, and 10% of the time no action on its part is required. Random numbers of 1 to 100
are being used. An appropriate assignment of random numbers for the recall category would be

[145] Gleim #: 1.5.145 -- Source: CMA 0408 1-176
Johnson Software has developed a new software package. Johnson’s sales manager has
prepared the following probability distribution describing the relative likelihood of monthly
sales levels and relative income (loss) for the company’s new software package.
Monthly Sales
In Units Probability Income(Loss)
10,000 .2 $(4,000)
20,000 .3 10,000
30,000 .3 30,000
40,000 .2 60,000
If Johnson decides to market its new software package, the expected value of additional
monthly income will be

[146] Gleim #: 1.5.146 -- Source: CMA 0408 1-177
According to recent focus sessions, Norton Corporation has a “can’t miss” consumer product
on its hands. Sales forecasts indicate either excellent or good results, with Norton’s sales
manager assigning a probability of .6 to a good results outcome. The company is now studying
various sales compensation plans for the product and has determined the following contribution
margin data:
Contribution
Margin
If sales are excellent and
Plan 1 is adopted $300,000
Plan 2 is adopted 370,000
If sales are good and
Plan 1 is adopted 240,000
Plan 2 is adopted 180,000
On the basis of this information, which of the following statements is correct?

[147] Gleim #: 1.5.147 -- Source: CMA 0408 1-178
Denton, Inc. manufactures industrial machinery and requires 100,000 switches per year in its
assembly process. When switches are received from a vendor they are installed in the specific
machine and tested. If the switches fail, they are scrapped and the associated labor cost of $25
is considered lost productivity. Denton purchases “off the shelf” switches as opposed to
custom-made switches and experiences quality problems with some vendors’ products. A
decision must be made as to which vendor to buy from during the next year based on the
following information.
Percentage expected
Vendor Price per switch to pass the test
P $35 90%
Q 37 94%
R 39 97%
S 40 99%
Which vendor should Denton’s controller recommend to management?

[148] Gleim #: 1.5.148 -- Source: CMA 0408 1-179
Scarf Corporation’s controller has decided to use a decision model to cope with uncertainty.
With a particular proposal, currently under consideration, Scarf has two possible actions, invest
or not invest in a joint venture with an international firm. The controller has determined the
following.
Action: Invest in the Joint Venture
Events and Probabilities:
Probability of success = 60%
Cost of investment = $9.5 million
Cash flow if investment is successful = $15.0 million
Cash flow if investment is unsuccessful = $2.0 million
Additional costs to be paid = $0
Costs incurred up to this point = $650,000
Action: Do Not Invest in the Joint Venture
Events:
Costs incurred up to this point = $650,000
Additional costs to be paid = $100,000
Which one of the following alternatives correctly reflects the respective expected values of
investing versus not investing?

[149] Gleim #: 1.5.149 -- Source: CMA 0408 1-180
Allbee Company has three possible investment opportunities. The controller calculated the
payoffs and probabilities as follows:
Probabilities
Payoffs Investment A Investment B Investment C
$(20,000) .3 .2 .3
(10,000) .1 .2 .1
30,000 .3 .2 .2
70,000 .2 .2 .3
100,000 .1 .2 .1
The cost of investments A, B, and C are the same. Using the expected-value criterion, which
one of the following rankings of these investments, from highest payoff to lowest payoff, is
correct?

[150] Gleim #: 1.5.150 -- Source: CMA 0408 1-181
The sales manager of Serito Doll Company has suggested that an expanded advertising
campaign costing $40,000 would increase the sales and profits of the company. He has
developed the following probability distribution for the effect of the advertising campaign on
company sales:
Sales increase
(units) Probability
15,000 .10
30,000 .35
45,000 .10
60,000 .25
75,000 .20
The company sells the dolls at $5.20 each. The cost of each doll is $3.20. Serito’s expected
incremental profit, if the advertising campaign is adopted, is

[151] Gleim #: 1.5.151 -- Source: CMA 0408 1-182
Stock X has the following probability distribution of expected future returns:
Expected
Probability Return
.1 –20%
.2 5%
.4 15%
.2 20%
.1 30%
The expected rate of return on Stock X is

[152] Gleim #: 1.5.152 -- Source: CMA 0408 1-183
Which one of the following four probability distributions provides the highest expected
monetary value?
Alternative #1 Alternative #2
Cash Cash
Prob Inflows Prob Inflows
10% $ 50,000 10% $ 50,000
20% 75,000 20% 75,000
40% 100,000 45% 100,000
30% 150,000 25% 150,000
Alternative #3 Alternative #4
Cash Cash
Prob Inflows Prob Inflows
10% $ 50,000 10% $150,000
20% 75,000 20% 100,000
40% 100,000 40% 75,000
30% 125,000 30% 50,000

[153] Gleim #: 1.6.153 -- Source: CMA 689 5-17
A quantitative technique useful in projecting a firm’s sales and profits is

[154] Gleim #: 1.6.154 -- Source: CMA 1294 4-30
Sweivel Company is preparing its budget and, taking into consideration the recent pace of
economic recovery, has developed several sales forecasts and the estimated probability
associated with each sales forecast. To determine the sales forecast to be used for budgeting
purposes, which one of the following techniques should Sweivel use?

[155] Gleim #: 1.6.155 -- Source: CMA 696 4-20
A widely used approach that managers use to recognize uncertainty about individual items and
to obtain an immediate financial estimate of the consequences of possible prediction errors is

[156] Gleim #: 1.6.156 -- Source: CMA 690 5-21
Through the use of decision models, managers thoroughly analyze many alternatives and decide
on the best alternative for the company. Often, the actual results achieved from a particular
decision are not what was expected when the decision was made. In addition, an alternative that
was not selected would have actually been the best decision for the company. The appropriate
technique to analyze the alternatives by using expected inputs and altering them before a
decision is made is

[157] Gleim #: 1.6.157 -- Source: CMA 1283 5-19
The process of evaluating the effect of changes in variables such as sales price or wage rates on
the optimum solution in a linear programming application is called

[158] Gleim #: 1.6.158 -- Source: CMA 0408 1-187
Susan Hines has developed an estimate of the earnings per share for her firm for the next year
using the following parameters.
Sales $20 million
Cost of goods sold 70% of sales
General & administrative expenses $300,000
Selling expense $100,000 plus 10% of sales
Debt outstanding $5 million @ 8% interest rate
Effective tax rate 35%
Common shares outstanding 2 million
She is now interested in the sensitivity of earnings per share to sales forecast changes. A 10%
sales increase would increase earnings per share by

[159] Gleim #: 1.6.159 -- Source: CMA 0408 1-141
Which one of the following techniques would most likely be used to analyze reductions in the
time required to perform a task as experience with that task increases?

[160] Gleim #: 1.6.160 -- Source: CMA 0408 1-143
A manufacturing firm plans to bid on a special order of 80 units that will be manufactured in
lots of 10 units each. The production manager estimates that the direct labor hours per unit will
decline by a constant percentage each time the cumulative quantity of units produced doubles.
The quantitative technique used to capture this phenomenon and estimate the direct labor hours
required for the special order is

[161] Gleim #: 2.1.1 -- Source: CMA 0205
In an organization that plans by using comprehensive budgeting, the master budget is

[162] Gleim #: 2.1.2 -- Source: CIA 579 111-13
While an operating budget is a key element in planning and control, it is not likely to

[163] Gleim #: 2.1.3 -- Source: CIA 1192 IV-19
There are many different budget techniques or processes that business organizations can
employ. One of these techniques or processes is zero-based budgeting, which is

[164] Gleim #: 2.1.4 -- Source: CMA 0205 2-3
In preparing a corporate master budget, which one of the following is most likely to be prepared
last?

[165] Gleim #: 2.1.5 -- Source: CMA 0205 2-4
Which one of the following is not an advantage of activity-based budgeting?

[166] Gleim #: 2.1.6 -- Source: CMA 1296 3-1
An advantage of incremental budgeting when compared with zero-based budgeting is that
incremental budgeting

[167] Gleim #: 2.1.7 -- Source: CIA 580 111-14
The major appeal of zero-based budgeting is that it

[168] Gleim #: 2.1.8 -- Source: CMA 1291 3-22
A systemized approach known as zero-based budgeting (ZBB)

[169] Gleim #: 2.1.9 -- Source: CIA 585 III-20
The major feature of zero-based budgeting (ZBB) is that it

[170] Gleim #: 2.1.10 -- Source: CMA 1291 3-20
A continuous profit plan

[171] Gleim #: 2.1.11 -- Source: CMA 1294 3-10
A continuous (rolling) budget

[172] Gleim #: 2.1.12 -- Source: CMA 694 3-13
A continuous (rolling) budget

[173] Gleim #: 2.1.13 -- Source: CMA 0205 2-5
The type of budget that is available on a continuous basis for a specified future period -- by
adding a month, quarter, or year in the future as the month, quarter, or year just ended is
dropped -- is called a(n)

[174] Gleim #: 2.1.14 -- Source: CMA 679 4-8
A static budget

[175] Gleim #: 2.1.15 -- Source: CMA 1295 3-10
Which one of the following statements regarding the difference between a flexible budget and a
static budget is true?

[176] Gleim #: 2.1.16 -- Source: Publisher
Zero-based budgeting forces managers to

[177] Gleim #: 2.1.17 -- Source: CMA 1290 3-19
The use of the master budget throughout the year as a constant comparison with actual results
signifies that the master budget is also a

[178] Gleim #: 2.1.18 -- Source: CMA 1291 3-13
A flexible budget is appropriate for

[179] Gleim #: 2.1.19 -- Source: CMA 1291 3-26
RedRock Company uses flexible budgeting for cost control. RedRock produced 10,800 units of
product during October, incurring indirect materials costs of $13,000. Its master budget for the
year reflected indirect materials costs of $180,000 at a production volume of 144,000 units. A
flexible budget for October production would reflect indirect materials costs of

[180] Gleim #: 2.1.20 -- Source: CMA 694 3-15
A method of budgeting in which the cost of each program must be justified, starting with the
one most vital to the company, is

[181] Gleim #: 2.1.21 -- Source: CMA 697 3-16
After the goals of the company have been established and communicated, the next step in the
planning process is development of the

[182] Gleim #: 2.1.22 -- Source: CMA 1296 3-14
Flexible budgets

[183] Gleim #: 2.1.23 -- Source: CMA 1292 3-12
Barnes Corporation expected to sell 150,000 board games during the month of November, and
the company’s master budget contained the following data related to the sale and production of
these games:
Revenue $2,400,000
Cost of goods sold:
Direct materials 675,000
Direct labor 300,000
Variable overhead 450,000
Contribution margin $ 975,000
Fixed overhead 250,000
Fixed selling and administration 500,000
Operating income $ 225,000
Actual sales during November were 180,000 games. Using a flexible budget, the company
expects the operating income for the month of November to be

[184] Gleim #: 2.1.24 -- Source: CMA 686 4-23
Simson Company’s master budget shows straight-line depreciation on factory equipment of
$258,000. The master budget was prepared at an annual production volume of 103,200 units of
product. This production volume is expected to occur uniformly throughout the year. During
September, Simson produced 8,170 units of product, and the accounts reflected actual
depreciation on factory machinery of $20,500. Simson controls manufacturing costs with a
flexible budget. The flexible budget amount for depreciation on factory machinery for
September would be

[185] Gleim #: 2.1.25 -- Source: CIA 586 IV-12
A company prepares a flexible budget each month for manufacturing costs. Formulas have been
developed for all costs within a relevant range of 5,000 to 15,000 units per month. The budget
for electricity (a semivariable cost) is $19,800 at 9,000 units per month, and $21,000 at 10,000
units per month. How much should be budgeted for electricity for the coming month if 12,000
units are to be produced?

[186] Gleim #: 2.1.26 -- Source: Publisher
A flexible budget is not appropriate for a(n)
Marketing Administrative Production
Budget Budget Budget
A. Yes Yes Yes
B. Yes No No
C. No Yes Yes
D. No No No

[187] Gleim #: 2.1.27 -- Source: CMA 1292 3-14
When preparing a performance report for a cost center using flexible budgeting techniques, the
planned cost column should be based on the

[188] Gleim #: 2.1.28 -- Source: CMA 697 3-12
Which one of the following budgeting methodologies would be most appropriate for a firm
facing a significant level of uncertainty in unit sales volumes for next year?

[189] Gleim #: 2.1.29 -- Source: CMA 696 3-14
Comparing actual results with a budget based on achieved volume is possible with the use of a

[190] Gleim #: 2.1.30 -- Source: CMA 1293 3-18
The use of standard costs in the budgeting process signifies that an organization has most likely
implemented a

[191] Gleim #: 2.1.31 -- Source: CMA 695 3-19
A plan that is created using budgeted revenue and costs but is based on the actual units of
output is known as a

[192] Gleim #: 2.1.32 -- Source: CIA 587 III-16
A manufacturing firm has certain peak seasons; namely the Christmas season, the summer
season, and the last 2 weeks of February. During these periods of increased output, the firm
leases additional production equipment and hires additional temporary employees. Which of the
following budget techniques would best fit this firm’s needs?

[193] Gleim #: 2.1.33 -- Source: CMA 0408 2-002
When compared to static budgets, flexible budgets

[194] Gleim #: 2.1.34 -- Source: CMA 0408 2-004
Rainbow, Inc. recently appointed Margaret Joyce as vice president of finance and asked her to
design a new budgeting system. Joyce has changed to a monthly budgeting system by dividing
the company’s annual budget by 12. Joyce then prepared monthly budgets for each department
and asked the managers to submit monthly reports comparing actual to budget. A sample
monthly report for Department A is shown below.
Rainbow, Inc.
Monthly Report for Department A
Actual Budget Variance
Units 1,000 900 100 F
Variable production costs:
Direct material $ 2,800 $ 2,700 $ 100 U
Direct labor 4,800 4,500 300 U
Variable factory
overhead 4,250 4,050 200 U
Fixed costs:
Depreciation 3,000 2,700 300 U
Taxes 1,000 900 100 U
Insurance 1,500 1,350 150 U
Administration 1,100 990 110 U
Marketing 1,000 900 100 U
Total costs $19,450 $18,090 $1.360 U
This monthly budget has been imposed from the top and will create behavior problems. All of
the following are causes of such problems except

[195] Gleim #: 2.1.35 -- Source: CMA 0408 2-026
Country Ovens is a family restaurant chain. Due to an unexpected road construction project,
traffic passing by the Country Ovens restaurant in Newtown has significantly increased. As a
result, restaurant volume has similarly increased well beyond the level expected. Which type of
budget would be most appropriate in helping the restaurant manager plan for restaurant labor
costs?

[196] Gleim #: 2.1.36 -- Source: CMA 0408 2-028
A budgeting approach that requires a manager to justify the entire budget for each budget
period is known as

[197] Gleim #: 2.1.37 -- Source: CMA 0408 2-031
Many companies use comprehensive budgeting in planning for the next year’s activities. When
both an operating budget and a financial budget are prepared, which one of the following is
correct concerning the financial budget?
Included in the Financial Budget
Capital Pro-forma Cash
Budget Balance Sheet Budget
A. Yes No Yes
B. No Yes No
C. Yes Yes Yes
D. No No No

[198] Gleim #: 2.2.38 -- Source: CMA 1289 4-8
The foundation of a profit plan is the

[199] Gleim #: 2.2.39 -- Source: CMA 1289 4-9
A production plan should be based on

[200] Gleim #: 2.2.40 -- Source: CMA 1290 3-17
The operating budget process usually begins with the