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BA2 Questions and Answers

Question # 1

Refer to the exhibit.

The output and costs for two periods were as follows:

Fixed costs will remain constant, but during Period 7, the variable cost per unit will increase by 25%. The output for Period 7 will be 1,600 units.

The budgeted total cost for period 7 will be:

Question # 2

Johnson & Smith is a huge corporation with many different departments covering hundreds of activities. They had switched to this new budgeting technique as it seemed as though it would help them allocate their

limited funds better.

It was successful to some extent as each manager was required to look at every cost his department accrued. They would then be responsible for coming up with new ways of performing these activities.

It became obvious that certain managers were unable to handle these paperwork intensive demands and so the company will be reverting back to a system that focuses primarily on cost drivers next year.

What budgeting technique will they be using next year?

A.

Activity Based Budgeting

B.

Zero Based Budgeting

C.

Incremental Budgeting

Question # 3

A company has produced its cash budget for the year and is concerned at the level of the cash deficit being shown. Which THREE of the following would enable the company to reduce its cash deficit in the short term?

A.

Reduce inventory level of finished goods

B.

Increase receivable levels to encourage sales

C.

Purchase new non-current assets to increase productivity levels

D.

Increase the overdraft facility

E.

Take longer to pay suppliers

F.

Lease rather than purchase new non-current assets

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